LONDON, Nov 2 (Reuters) - As environmental, social and governance (ESG) funds rack up trillions of dollars, global market watchdogs moved on Tuesday to flush out any asset managers who may be hoodwinking investors. Regulators are playing catch-up to contain the risk of money managers overstating the ESG credentials of their products, with the value of such funds hitting a record $3.9 trillion at the end of the third quarter, Morningstar data shows. read more Penalties for "greenwashing" have been few and far between. Now IOSCO, which groups watchdogs from the United States, Europe, Asia and elsewhere has published recommendations which its members are obliged to apply when scrutinising how asset managers sell funds which tout ESG good practice."Setting regulatory and supervisory expectations is therefore fundamental to addressing issues relating to risk mismanagement and greenwashing," Erik Thedeen, head of Sweden"s financial markets watchdog and chair of the IOSCO taskforce which drafted the recommendations, said in a statement. They set out what regulators should check for in asset managers" internal policies and procedures on such investments, and how they market funds that claim to be sustainable. The new rules coincide with a U.N. conference critical to averting the most disastrous effects of climate change which opened on Monday, with world leaders, environmental experts and activists pleading for decisive action to halt global warming. The "baseline" of global norms set out by IOSCO seeks to underpin investor protection and bolster credibility in green finance to help governments meet net-zero targets. Regulators said the recommendations are part of a holistic approach that includes a new International Sustainability Standards Board to write "baseline" disclosures from listed companies on how climate change affects their bottom line. In addition, IOSCO, whose members regulate 95% of the world"s securities markets, will later this month set out ways to make ESG ratings and data, widely used by asset managers for marketing sustainable funds, more rigorous and transparent. Regulators say reforms such as Tuesday"s, rules to regulate ESG ratings and common company disclosures will help punish greenwashing more easily and consistently across jurisdictions.