SFC publishes guidance on enhanced disclosures for green or ESG funds

11 Apr 2019



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 SFC-authorised green or environmental, social and governance (ESG) funds (Notes 1 & 2).                                             

The guidance is one of the regulatory initiatives of the SFC’s Strategic Framework for Green Finance which includes, among others, providing disclosure guidance to facilitate disclosure and reporting of green-related investment products (Note 3).  

The SFC has evaluated the quality of disclosure of SFC-authorised funds with investment focus on climate, green, environmental or sustainable development and found that a majority of them do not specifically disclose how investment managers integrate ESG factors into the criteria used in their investment selection process.

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 expectation on how the existing Code on Unit Trusts and Mutual Funds and disclosure requirements apply for SFC-authorised green or ESG funds and provides guidance to narrow the disclosure gap among these funds.

"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," said Mr Ashley Alder, the SFC's Chief Executive Officer.

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 on its website to enhance the visibility of these funds.

End

Notes:

  1. There are currently over 20 SFC-authorised funds with investment focus on climate, green, environmental or sustainable development.
  2. The disclosure guidance applies to SFC-authorised funds which incorporate one or more of the globally recognised green or ESG criteria or principles as their key investment focus and reflect such in their name and investment objective or strategy.
  3. The SFC’s Strategic Framework for Green Finance, published in September 2018, is available here.


Page last updated : 11 Apr 2019