Hong Kong’s Securities and Futures Commission (SFC) is stepping in to provide regulatory support for the development of the country’s sustainable investing.
Authorities in major jurisdictions – including the mainland China – are starting to do the same and their regulatory initiatives within this space will increasingly have an impact on Hong Kong’s markets.
‘Our regulatory framework will need to align with those in the mainland and leading overseas markets in order for Hong Kong to remain competitive in sustainable investing,’ SFC said.
As a first step, the regulator will conduct a survey of asset managers and asset owners participating in the Hong Kong market on four major aspects of sustainable investing.
This include their commitment, investment process, post-investment ownership practices and reporting of environment, social and governance (ESG) performance, with an emphasis on the environmental aspect.
The survey will cover asset managers of different types and sizes, as well as those using different investment strategies.
Based on the survey outcome, the SFC will consider introducing appropriate policies, codes and guidance that require asset managers to disclose how and to what extent ESG factors – especially environmental factors – are integrated into investment decisions.
To strengthen its leadership in supporting green-related investments, the SFC’s investment committee will also enquire in detail how and to what extent its external managers are incorporating ESG principles into their investment and risk analysis processes.
What’s more, the SFC said it will also work with organisations such as the CFA Institute and the United Nations-supported Principles for Responsible Investment association to enhance the industry’s knowledge of how to integrate ESG factors into the investment process.
In Hong Kong, there are currently 21 SFC-authorised funds with an investment focus on climate, green, environmental or sustainable development.
The SFC said it has seen a noticeable increase in the number of new fund applications and applications for change of investment strategy to adopt an ESG investment theme this year.
The regulator said it will pay increased attention to the quality of the disclosure of authorised ESG-related funds and will strengthen public education in green investment through its Investor Education Centre.
In its preliminary review, the SFC said most funds have disclosed the ESG definition or ESG-related elements in their investment objectives or strategies.
However, a majority of these funds do not specifically disclose how investment managers integrate ESG factors into the criteria used in the investment selection process for the fund portfolio.