Legal & Regulatory News

IOSCO publishes report on protecting investors against fraud and greenwashing

On the 22 August 2022, the Board of the International Organization of Securities Commissions (IOSCO) published a report titled, 'Retail Investor Education in the Context of Sustainable Finance Markets and Products' (the Report).

The Report was commissioned in response to market investors increasingly seeking out sustainable investments and products with the aim of achieving greater financial returns and/or avoiding risks associated with various environmental, social and governance issues. IOSCO is seeking to ensure that the sustainability claims made about financial investments are accurate and that the integrity of the products are upheld.

The Report notes that there are a number of financial education issues and challenges which retail investors currently face when seeking to understanding sustainable investments, including:

·         a lack of consistent and comparable ESG information;

·         knowledge gaps, which mean that the challenges or difficulties retail investors may face in understanding the characteristics of sustainable investments can undermine their ability to evaluate ESG financial products, and thus potentially impact investor protection;

·         difficulties in comparing traditional and sustainability-linked financial products, impacting the perceptions of performance and risk;

·         the level of awareness on greenwashing risk; and

·         a lack of awareness of the issues to look for.

In response to the market challenges highlighted, the Report identifies and provides a number of recent developments and suggested approaches for regulators to improve investor education on sustainable finance, with a view to ensuring that all market participants understand the risks and rewards of sustainable finance solutions.

Click here to view the Report.

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