As difficult as this may sound, it is a problem that regulators are grappling with. Given the dramatic growth of permanent funds in Canada, Tam says regulators are keeping a close eye on the space. But given the diversity in outlook, it will be difficult for CSAs to draw thresholds and bright lines around the ESG impact, let alone defining specific thresholds for fund providers to avoid being subject to more intense regulatory actions.
Overall, Tam argues that the expectations expressed by CSA in its recent guidance were reasonable and were also very helpful in promoting transparency and consistency. He appreciated the guidance of the regulators for highlighting some of the commonly used terms in the sustainable investment sector. Its language is being developed as part of the CIFSC’s Responsible Investment Recognition Framework, as well as the CFA Institute’s Voluntary Standards for ESG Investment Disclosure.
The word “sustainable” can mean different things to different people, so it’s important to define those terms, he says. “The guidance provides appropriate examples of general terms and approaches, which will be useful for investors to find a product best suited to their needs.”
‘it will take time’
While he argues that the landscape for ESG disclosure is more established than many believe, Tam acknowledges that Canada is still in the early stages of effectively stopping greenwashing, social washing and other similar practices.
Since CSA has no known plans to develop its own framework for identifying responsible investment funds, they say advisors are finding it challenging to select a sustainable or responsible fund that aligns with the investor’s objective. Ho. To help with this, CIFSC is developing its own Canada-wide framework that can be implemented regardless of data provider, which Tam believes will be of great help to the cause.