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SFC issues guidance in attempt to clarify ESG investment rules

  • Apr 16, 2019

Hong Kong's SFC has issued a circular to try and create some clarity around the complex issue of ESG investing. The aim is to offer guidance to asset management companies of SFC-authorised unit trusts and mutual funds on enhanced disclosures for ESG funds.

Ashley Alder, the SFC's chief executive officer told reporters, "This guidance drives home the important message to asset managers that they are expected to do more than simply make the claim that they take ESG factors into account, without making clear to investors how they do this. It also underscores the SFC's commitment to develop Hong Kong as an international green finance centre."

After evaluating the quality of asset managers' disclosures on funds targeting environmental and sustainable development, it was found most managers do not specifically disclose how they integrate ESG factors into the criteria used in their investment decision process.

The guidance is one of the regulatory initiatives of the SFC’s Strategic Framework for Green Finance which includes providing disclosure guidance and reporting of green-related investment products. To enhance disclosure comparability between similar types of SFC-authorised green or ESG funds and their transparency and visibility, the circular sets out the SFC’s expectations on transparency.

Given the evolving nature of green or ESG investment landscape, the SFC will keep in view local and international market and regulatory developments and may provide further guidance or impose additional requirements for green or ESG funds, where appropriate.

The SFC will also create a central database of SFC-authorised green or ESG funds.

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