The Securities and Futures Commission (SFC) today issued a circular to provide guidance to management companies of SFC-authorised unit trusts and mutual funds on enhanced disclosures for funds which incorporate environmental, social and governance (ESG) factors as a key investment focus (ESG funds) (Note 1).
The circular, which supersedes a previous version issued in 2019 (Note 2), includes a new requirement for ESG funds to conduct and disclose periodic assessments of how they incorporate ESG factors and also provides additional guidance for ESG funds with a climate-related focus.
Since 2019, awareness of ESG investing has grown and the number of ESG funds offered to the public in Hong Kong has more than doubled. In view of the rapid development of a diverse range of ESG investment strategies, the SFC is mindful of the need for asset managers to clearly disclose how funds attain their ESG focus in order to help investors understand these products and assess whether they meet their investment needs.
"Making sustainability-related disclosures more transparent, comparable and consistent will help investors identify suitable ESG funds and reduce opportunities for greenwashing," said Mr Ashley Alder, the SFC's Chief Executive Officer. “Hong Kong’s financial market is where global capital connects with Mainland enterprises, so what we do here can have an outsized influence on global developments in green and sustainable finance.”
A database of SFC-authorised ESG funds is available on the SFC website. To enhance transparency for these funds, their key features will also be listed in the database after the new circular takes effect on 1 January 2022.
The SFC will keep in view market developments and may provide further guidance or impose additional requirements for ESG funds where appropriate.
Notes:
- Currently, there are about 60 SFC-authorised funds with investment focus on climate change, green, ESG or sustainable development.
- In April 2019, the SFC issued a Circular to management companies of SFC-authorized unit trusts and mutual funds – Green or ESG funds as an initial step to enhance the disclosure standard of ESG funds and improve their comparability, transparency and visibility.
