Education on sustainable finance helps protect investors
The Board of the International Organization of Securities Commissions (IOSCO) published a report that identifies recent developments in investor education on sustainable finance, with a view to enhancing investor education and protection and supporting the sound development of this growing financial market.
The report on Retail Investor Education in the Context of Sustainable Finance Markets and Products indicates that securities regulators have increasingly focused on whether sustainable finance claims are accurate and if investors have the information, they need to evaluate sustainable finance products. To make informed decisions, retail investors need to understand the characteristics of such products.
Accordingly, the report identifies some of the main challenges and sound practices for developing educational content on these matters, informing investors of the features and risks of sustainable investments, and fostering educational activities that create the conditions for better protecting and informing retail investors on the opportunities and risks related to sustainable finance products.
The report describes educational activities that regulators should consider, taking into account the level of sustainable finance and retail investor participation in their markets. This includes, for example:
• explaining to retail investors how to obtain sustainability-related information and to search and understand whether the offered product(s) matches their sustainability related preferences; and
• supporting initiatives of market participants to help retail investors understand ESG certifications, labels and scores regarding the financial products offered to individuals and encouraging and/or facilitating training that helps financial advisors better understand greenwashing and how to protect investors against unsubstantiated or misleading sustainability claims.
The report includes some key messages that securities regulators should consider for their financial education programs, to help retail investors understand how a “smart investor” would behave when faced with sustainable finance products.