SFC to require periodic review of ESG funds

In a new circular, the SFC asks for the assessment of how ESG factors are incorporated in the financial market.

The Securities and Futures Commission (SFC) has issued a circular that will impose a new requirement on ESG (Environmental, Social and Governance) funds to enhance disclosures for sustainability-focused funds.

The circular will require ESG funds to conduct and disclose periodic assessments of how they incorporate ESG factors.

"Making sustainability-related disclosures more transparent, comparable and consistent will help investors identify suitable ESG funds and reduce opportunities for greenwashing," Ashley Alder, SFC CEO, said.

“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.”

Awareness of ESG investing has grown, starting 2019, and the number of ESG funds offered to the public in Hong Kong has since more than doubled.

In light of this, the SFC sees 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.

There are currently 60 SFC-authorised funds with investment focus on climate change, green, ESG or sustainable development.

The SFC continue monitoring market developments and provide the additional guidance as it sees fit.