The fight against greenwashing in finance never ends. Countries and stock exchanges the world over are looking for new ways to keep ESG investments honest. ESG funds are still popular among many investors. However, how funds define ESG and investor expectations don’t always align. The Thai SEC is working on new ESG fund rules to help bridge the gap and present relevant information to investors. They describe these rules in a press release:
“The Securities and Exchange Commission (SEC) is seeking public comments on draft regulations to enhance sustainability-related disclosure requirements for Sustainable and Responsible Investing Funds (SRI Funds). The proposed amendments would require Thai ESG and Thai ESGX Funds that invest in shares of listed companies participating in the Listed Company Value Creation Support Program (JUMP+ Program) to disclose information on such investments and the progress of such companies in the fund factsheet. The aim is to provide investors with relevant information to support their investment decisions and enable them to better monitor the management of their investments. The proposed amendments would also increase flexibility for SRI Funds in changing reference ESG benchmark for SRI Funds.”
Regulators are torn between two general approaches: prescriptive and disclosure-based. Prescriptive laws lay out exact criteria funds need to meet to label themselves “sustainable.” This method ensures stronger consistency between funds but offers little flexibility. The disclosure-based schemes allow funds to label themselves as sustainable, but require that they clearly disclose their methodologies and rationales. This provides funds with more flexibility to define sustainability as they see fit. However, it offloads a considerable amount of research and due diligence onto the investors. These proposed Thai ESG fund rules would move the market closer to a disclosure-based framework.
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