Thursday October 29 2020

News Source: Fund Regulation

Focus: ESG

Type: General

Country: Hong Kong




The Securities and Futures Commission (SFC) has launched a consultation on proposed requirements for fund managers to take climate-related risks into consideration in their investment and risk management processes and make appropriate disclosures to meet investors’ growing demands for climate risk information and combat greenwashing.

Under the proposals, the Fund Manager Code of Conduct would be amended and the SFC will set out expected baseline requirements and standards to facilitate fund managers’ compliance.

Objectives

In introducing the proposed requirements for fund managers, the SFC aims to achieve the following objectives:

  • increase awareness of the impact of carbon emissions and the associated risks;
  • ensure proper handling of climate-related risks, which are a source of financial risk;
  • promote clear, comparable and high-quality disclosures so as to provide more useful information for investors to make informed decisions and combat “greenwashing”; and
  • develop appropriate regulatory requirements in a constantly evolving environment where different terminologies are in circulation and methodologies are evolving.

Format and Frequency of disclosures

A fund manager should provide disclosures in the following manner:

  • adopt a proportionate approach, ie, the information disclosed should be proportionate to the degree climate-related risks are properly considered in the investment and risk management processes;
  • make adequate disclosures of information in writing and communicate to fund investors through electronic or other means (eg, on a website rather than individual communications to investors); and
  • review and update disclosures at least annually and inform fund investors of any material changes made as soon as practicable.

Proposed Transition Periods

The proposals set out in this paper will be subject to a public consultation until 15 January 2021. Taking into account the respondents’ comments, a consultation conclusions paper will be issued together with the final form of the proposed requirements.

The SFC appreciates that the industry may wish to establish or revise systems and controls to align with any final proposals. Accordingly, it is proposed that:

  • a nine-month and a 12-month transition period for Large Fund Managers to comply with the baseline requirements and enhanced standards respectively; and
  • a 12-month transition period for other fund managers to comply with the baseline requirements.

Deadline for this consultation is on or before 15 Jan 2021.

Click on the link for further information.