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The Securities and Futures Commission (SFC) today released the findings of its Survey on Integrating Environmental, Social and Governance (ESG) Factors and Climate Risks in Asset Management (Note 1).
Of the licensed asset management firms surveyed (Note 2), 660 considered at least one ESG factor when evaluating a company’s investment potential. Of these 660 firms, 68% saw ESG factors as a source of financial risk, although only 35% consistently integrated ESG factors in their investment and risk management processes. Nearly two-thirds of licensed firms active in asset management plan to strengthen their ESG practices in the next two years. When the focus narrows to the management of climate-related risks, only 23% of the 660 asset management firms have processes in place to manage the financial impact of risks arising from climate change.
While ESG factors are important and interlinked, in the near term, the SFC will focus on promoting the management of climate change risks in asset management by developing expected standards and providing practical guidance and best practices. The SFC will also establish an industry group to exchange views with experts in environmental and climate risks, as well as sustainable finance.
Notes:
- This survey is one of the initiatives in the SFC’s Strategic Framework for Green Finance, published in September 2018.
- 794 firms currently active in asset management responded to the survey.
