IOSCO Recommends Best Practices to Counter Greenwashing

IOSCO issued recommendations for regulators to improve ESG guidance, disclosures and standards, and for asset managers and ESG information providers to prevent greenwashing. In its Good Sustainable Finance Practices Call For Action, IOSCO stated that all "voluntary standard setting bodies" should develop guidance for their members that promotes IOSCO's best practices to counter the risks of greenwashing.

IOSCO's recommendations for regulators and associations include:

• establishing clear expectations regarding the development of sustainability-related risks and related disclosures (including product-level disclosures);
• standardizing ESG-related terms to ensure consistency throughout the industry and comparability between similar products;
• promoting sustainability-related financial and investor education initiatives; and
• clarifying the due diligence requirements for, and subsequent review of, ESG ratings and data used by asset managers.

IOSCO's recommendations for ESG ratings firms and data providers include:

• implementing policies designed to ensure the dissemination of high-quality ESG ratings and data products;
• establishing controls to prevent conflicts of interest, including undue political or economic influence;
• prioritizing transparency and public disclosure related to ratings methodologies and information gathering processes;
• designing security controls to protect pertinent non-public information related to ESG products and ratings;
• improving the processes for information gathering; and
• responding to concerns raised by covered entities regarding their ESG ratings and data products.