Fund managers in Hong Kong could be forced to disclose any climate-related risks in their portfolios and products based on a proposal from the industry’s regulator.
The Securities and Futures Commission (SFC) has proposed an amendment to the Fund Manager Code of Conduct that will require the managers of collective investment schemes (CIS) to include any such risks across their investment processes. The move is an attempt to meet the growing investor demands for more consistent climate-related information and to address concerns of greenwashing among managers.
"Addressing the threat of climate change and the associated risks is becoming a major priority on the global regulatory agenda," said Ashley Alder, chief executive of the SFC. "The proposed requirements will help ensure that fund managers properly handle climate-related risks and promote clear, comparable and high-quality disclosures to help investors make more informed decisions."
Four key elements are covered in the proposals: governance, risk management, investment management and disclosure.
In its initial phase, the SFC’s plans will be applicable to managers of CIS, but not discretionary mandates. They will also only apply to managers responsible for the overall operation of the funds and not those who only manage part of a fund.
It is not the first time the SFC has sought to address green issue. In September 2018 it announced a strategic framework to contribute to the development of green finance in Hong Kong. Part of this work involved a survey of asset managers and asset owners, the results of which were published in December 2019.
The research found that while asset managers considered ESG factors to be important, there was not a consistent approach to disclosure.
Managers have until January 15, 2021 to respond to the consultation paper.
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