CFA Institute, GSIA and PRI launch harmonised definitions for responsible investment

Margaret Franklin

CFA Institute, the Global Sustainable Investment Alliance (GSIA), and Principles for Responsible Investment (PRI) have issued a new guidance that aims to bring greater understanding and consistency to terms used in responsible investing which will potentially reduce greenwashing by asset managers.The Definitions for Responsible Investment Approaches^[1] guidance is intended for investors, regulators, policymakers, and other market participants. For each of the terms below, CFA Institute, GSIA, and PRI have outlined a definition, detailed explanation, and a list of definitions that have served as the primary inputs for using the terms in practice.

• screening
• ESG integration
• thematic investing
• stewardship
• impact investing.

The collaboration between the three organisations was inspired by calls from regulators for voluntary standard setters to develop common terms and definitions to ensure consistency in the global wealth management industry. The guidance clarifies existing terms and definitions but does not create new terms. It also recognises important shifts that have taken place in responsible investment, with strategies now being applied to a wide range of investment styles and asset classes in both public and private markets. Prior versions of the definitions were, in some cases, limited to investments in listed companies.

Margaret Franklin, President and CEO at CFA Institute, said: “Technical terminology is an important part of responsible investment.  New terms are always emerging alongside new ideas, and definitions evolve over time.  It is important to standardise 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. We believe this guidance will serve as a valuable resource for CFA charterholders, members, and candidates.”

Lisa Carroll, CEO of CFA Societies Australia, said:  “We welcome and encourage the Australian investment industry to adopt the definitions in this guidance to create greater consistency and understanding by all parties, including investors.

“Promoting the consistent and precise use of terminology in responsible investment will help to reduce greenwashing and introduce greater consistency among asset managers in developing and marketing responsible investment products. The guidance 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,” Carroll said.  

“These definitions will create a consistent foundation for the continued professionalisation of responsible investment.”

David Atkin, CEO at PRI, said: “Responsible investment has grown significantly, and so have the expectations for clear and transparent communication. 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.”

Simon O’Connor, Former Chair of the GSIA, said: “For many years, our organisations have been working to define and clarify the language of responsible investment.  This foundation of experience and expertise enabled us to come together with a common purpose to clarify and harmonise these definitions on a global scale. We now encourage the investment industry and regulators to adopt these definitions to create greater consistency.”

The guidance is available to read on each of the respective organisation’s websites:

CFA Institute, GSIA and PRI.