For the second consecutive year, the Malta Financial Services Authority is participating in the annual World Investor Week, which is being organised for the sixth time by the International Organisation of Securities Commissions (IOSCO) during the first week of October.
Aimed at raising awareness on the importance of investor education and protection, this year’s campaign focuses on investor resilience and sustainable finance, complementing previous IOSCO World Investor Week editions which addressed fraud and scam prevention, as well as crypto asset investments.
Through this campaign, the MFSA intends to make investors aware of the type and level of risk associated with a particular investment or asset class, and how these risks can be mitigated through diversification. Investors will also be reminded of the benefits of implementing an effective budgeting strategy: this helps with managing unexpected shocks and risks, such as the market volatility brought about by the war in Ukraine or the outbreak of COVID-19. Such financial shocks require adequate emergency funds.
A crucial part of improving investor resilience entails conducting sufficient research before taking a financial decision, taking into account factors such as the environmental and social impact of the business model or activities of the investment they have their eye on.
Delving further into this topic, the campaign promotes sustainable finance, explaining the benefits of taking into account Environmental, Social and Governance (ESG) factors when making investment decisions. In this respect, investors should carefully review the terms and conditions, and information documents to understand how the investment weighs up various ESG factors and to assess whether this is in line with their own investment goals, risk tolerance and preferences.
In light of the increasing appetite for sustainable investments, investors should also keep an eye out for the risks that come along with them. During the IOSCO World Investor Week, the most common red flags related to ‘greenwashing’ will be highlighted. Greenwashing refers to businesses’ wrongful practice of promoting products and services as being environmentally friendly when, in reality, this might be either false or only partially true. A common example of greenwashing would be a fund that is being marketed as having a focus on sustainability goals, despite the fact that it is investing in companies that emit substantial carbon volumes ,or which manufacture products that make vague claims about various percentages of post-consumer recycled content. Usually such companies fail to provide the necessary evidence to substantiate these sustainability claims.
As a rule of thumb, companies’ claims in relation to ESG or sustainable finance factors are more credible and legitimate when they abide by measurable metrics and objectives, such as the amount of reduction in emissions or target dates. These should be audited and publicly disclosed in order to prove their authenticity.
Throughout World Investor Week, the MFSA disseminated IOSCO’s messages on its social media pages with the aim of enhancing investors’ confidence when accessing financial markets.
As part of the initiatives, a bell-ringing ceremony for financial literacy was also held at the Malta Stock Exchange on Tuesday 4 October 2022, with the participation of Emily Benson, MFSA’s Head of Conduct Supervision.
Commenting on this initiative, Emily Benson stated: “The MFSA is participating once again in the IOSCO World Investor Week to raise awareness on investor protection and financial literacy, two topics of utmost importance, especially in the challenging times we are living in. The MFSA remains committed to its mission to ensure that consumers participating in the financial markets make informed decisions and are adequately protected.”