Oversight - SFC consultation on climate-related risks requirements

On 29 October 2020, the Securities and Futures Commission of Hong Kong (SFC) published a Consultation Paper on the Management and Disclosure of Climate-related Risks by Fund Managers (Consultation Paper). In the Consultation Paper, the SFC has proposed to amend the Fund Manager Code of Conduct (FMCC) to introduce requirements for fund managers to take climate-related risks into consideration in their investment and risk management processes as well as to make appropriate disclosures to meet investors’ growing demand for climate risk information and to combat 'greenwashing'. To provide further practical guidance, a new circular (Circular) is also proposed to be issued by the SFC which will set out baseline requirements and enhanced standards for larger fund managers in respect of climate-related risks, a draft of such requirements being set out in the consultation paper.

This Oversight provides an overview of the proposed requirements in the consultation paper. It first briefly discusses the existing guidance from the SFC and market participants on ESG regulation in the form of the ESG Fund Circular and the ESG Survey. It then turns to discuss the proposed amendments to the FMCC and the accompanying requirements proposed by the SFC for inclusion in the upcoming Circular. It will then discuss the practical implications of the proposed changes.