How to choose your investments

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There are a number of investing standards that investors should consider. The Global Impact Investing Network (GIIN) operates the IRIS rating system. It is working to develop metrics to evaluate impact investments, similar to those used by the Securities and Exchange Commission. The goal is to create a widely accepted system for investors to evaluate impact investments.

In the US, the SEC recently proposed new regulations on responsible investments. Its goal is to protect investors. The SEC wants investment firms to disclose certain environmental, social, and governance (ESG) data to investors. The SEC wants to ensure that ESG disclosures are meaningful and credible. The International Financial Reporting Standards Foundation is working to create global financial reporting standards for ESG.

The European Union is a leader in this area, having enacted the Sustainable Finance Disclosure Regulation (SFDR) in 2017. The SFDR requires large businesses to report their environmental and social impacts on an annual basis. Its proposed changes aim to broaden sustainability reporting requirements and ensure that companies report all the information necessary to comply with SFDR. Together, these standards will help investors assess the sustainability of companies and fund managers.

Financial market regulators have also developed a set of standards that define a sophisticated investor. This group typically has more experience and wealth, and is able to absorb losses from riskier investments. They are referred to as professional clients in the EU and accredited investors in the US.

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