The Securities and Futures Commission (SFC) of Hong Kong is soliciting opinions about a new rule, which will ask fund managers to take climate-related risks into consideration and disclose relevant information in their investment and risk management processes, as reported by Caixin on October 30. The Hong Kong SFC defines climate risks as long-term risks on entities that directly result from extreme weather events and gradual changes in climate patterns, including asset impairments, supply chain disruption, as well as risk regarding transformation to a low-carbon economy. Fund managers who directly operate collective investment schemes (CIS) would preliminarily adopt the new rule. Entrusted fund managers who manage individual funds are not required to comply at present.
This is the newest step Hong Kong securities regulators are enacting to strengthen ESG application in investments since SFC released its strategy framework for Hong Kong green finance development in September 2018. The Hong Kong SFC mentioned that the new rule aims to improve fund managers’ awareness of climate-related impact and risk, such as carbon emissions. This in turn, would then provide clearer, more comparable, and higher-quality information disclosure for investors to make investment decisions. In addition to climate risks, the authority also recommends fund managers to consider other sustainability risks. Previously, the HKEX [0388:HK] revised and tightened ESG information disclosure requirements at the end of 2019, which took effect on July 1, 2020. Specifically, the new version orders listed companies’ Board of Directors to sign off on evaluation ESG event reports, weather events that may impose significant impacts on the company, and more. This time, all fund managers should comply with these basic disclosure requirements, while those who manage funds with over HKD4bn worth of assets under management (AUM) shall provide more detailed information about climate-related risks.