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Environmental, social and governance (ESG) funds continue to be under the regulatory spotlight of the Securities and Futures Commission (SFC). On 16 December 2019, the SFC released findings of its industry-wide survey (Survey) of type 9 licensed asset management firms and institutional asset owners conducted from March to September 2019. The Survey aims to ascertain how and to what extent asset managers and institutional asset owners consider ESG risks, in particular climate change risk. This article highlights key market trends, common ESG practices, expectation gaps between asset managers and asset owners and the SFC’s three deliverables in relation to ESG issues.
Market trends
ESG practices
Of the 660 Firms:
The Survey also revealed negative/exclusionary screening as among the most common ESG investment strategies. Other methodologies include norms-based screening and thematic investing, etc.
Expectation gaps between asset managers and asset owners
What’s next?
Following the Survey, the SFC aims to achieve the following three outcomes in the near term:
The above add to the SFC’s array of existing measures in regulating ESG funds, including laying down specific disclosure requirements for ESG funds in a circular issued on 11 April 2019 and setting up a central database on the SFC’s website of ESG funds authorized for retail distribution in Hong Kong. Other regulators including the Hong Kong Stock Exchange and the Hong Kong Monetary Authority have also rolled out publications on ESG issues.
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