PRI, GSIA and CFA agree to harmonise green finance definitions
Three major finance industry bodies have agreed to harmonise key definitions for a number of investment terms, including stewardship and impact investing.
The CFA Institute, the Global Sustainable Investment Alliance (GSIA), and Principles for Responsible Investment (PRI) issued a new resource that "aims to bring greater understanding and consistency to terminology used in responsible investment," as the organisations explained in an email to Net Zero Investor.
They include 'screening', 'ESG integration', 'thematic investing', 'stewardship' and 'impact investing.'
For each term, the CFA Institute, GSIA, and PRI outlined a definition, detailed explanation, a list of definitions that served as the primary inputs, and guidance for using the terms in practice.
The guidance is intended for investors, regulators, policymakers, and other market participants, the bodies stressed.
“For many years, our organisations have been working to define and clarify the language of responsible investment," stressed Simon O’Connor, former chair of the GSIA.
"We now encourage the investment industry and regulators to adopt these definitions to create greater consistency," he added.
David Atkin, CEO at PRI, said in agreement that "investors need language that enables them to communicate their responsible investment practices accurately, succinctly, and consistently. By unifying around common definitions, we support our signatories and members to communicate with confidence.”
"Investors need language that enables them to communicate their responsible investment practices accurately, succinctly, and consistently."
The collaboration came about after calls from regulators for voluntary standard setters to develop common terms and definitions to ensure consistency throughout the global asset management and wealth management industries.
The new terminology includes definitions for screening, ESG integration, thematic investing, stewardship and impact investing.
"Promoting the consistent and precise use of terminology contributes to efforts to address greenwashing," the three organisations explained in a statement.
"The work to harmonise terminology also serves to deepen understanding of the nuances of responsible investment approaches," the statement read.
"It counters confusion about what different responsible investment strategies seek to achieve by clearly differentiating the objectives of approaches, such as ESG integration and impact investing."
Marg Franklin, the current CEO of the CFA Institute, noted that "technical terminology is an important part of professional practice. New terms are always emerging alongside new ideas, and definitions evolve over time."
She added that: "It’s important to standardize terms and definitions as practices mature so that professionals can communicate efficiently and effectively with each other as well as with clients, regulators, and other market participants."
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