In December 2021, the Hong Kong Monetary Authority (HKMA) issued the results of its pilot climate risk stress test (CRST).  The CRST assesses the potential impact of climate change on the Hong Kong banking sector.  It marks the latest such publication by a regulator on the topic, with French regulator, Autorité de contrôle prudentiel et de résolution (ACPR), having published the results of its climate risk stress test in Q2 2021 and a number of other countries’ regulators undertaking similar analyses during 2022.

The CRST indicates that the Hong Kong banking sector should remain resilient to climate-related shocks given the Banks’ strong capital buffers. However, it was noted that simplified assumptions and use of historical data in modelling could mean the potential impact could be more serious than predicted.

The exercise identified various climate-related vulnerabilities for Banks to seek to address and highlighted gaps in terms of insufficient granular, reliable data, as well as a lack of widely-accepted standards for classifying and identifying climate risk exposures.  HKMA notes that addressing these issues will require concerted efforts of the industry.

In this Blog Post, we set out a high level summary of the CRST in terms of the scope of the CRST, pertinent findings and actions required to enhance climate risk management going forward.


Continue Reading HKMA Publishes Report On First Climate Risk Stress Test Of The Hong Kong Banking Sector

The sustainable investing market is witnessing remarkable growth: since 2018, annual cash flows into sustainable funds have increased tenfold. Now, more than ever, investors and asset managers alike seek sustainable products and strategies offering robust financial returns. The field, however, has been haunted by greenwashing claims and a lack of consistency in identifying what, exactly, makes an investment “sustainable”.

Sustainability or “green” taxonomies developed by governments, international bodies and non-governmental organizations (NGOs) can help resolve these challenges and inconsistencies by identifying specific assets, activities or projects that meet defined thresholds and metrics that quantify sustainability. These systems can cover the full spectrum of sustainability topics, from achieving acceptable levels of greenhouse gas emissions to compliance with certain human rights standards. Among other benefits, sustainability taxonomies can:

  • assist investors, asset managers and asset owners in identifying sustainable investment opportunities and constructing sustainable portfolios that align with taxonomy criteria;
  • drive capital more efficiently toward priority sustainability projects;
  • help protect asset managers against claims of greenwashing by providing an independent benchmark for the sustainability performance of investments; and
  • guide future public policies and regulations targeting specific economic activities based on taxonomy criteria.

In this series of Blog Posts, we first provide a brief overview of some of the key existing and developing taxonomies around the world. We then set out our analysis of the ways asset managers are already leveraging taxonomies in their businesses based on a review of publicly available responsible investment reports.  Finally, we highlight certain challenges that asset managers may encounter as these systems develop and interest in sustainable investing continues to grow.

Continue reading this Part III to understand some of the taxonomy-related challenges that asset managers may encounter. You can find Parts I and II here and here.


Continue Reading Leveraging Taxonomies: How Asset Managers Are Using New Sustainability Classification Systems – Part III

The sustainable investing market is witnessing remarkable growth: since 2018, annual cash flows into sustainable funds have increased tenfold. Now, more than ever, investors and asset managers alike seek sustainable products and strategies offering robust financial returns. The field, however, has been haunted by greenwashing claims and a lack of consistency in identifying what, exactly, makes an investment “sustainable”.

Sustainability or “green” taxonomies developed by governments, international bodies and non-governmental organizations (NGOs) can help resolve these challenges and inconsistencies by identifying specific assets, activities or projects that meet defined thresholds and metrics that quantify sustainability. These systems can cover the full spectrum of sustainability topics, from achieving acceptable levels of greenhouse gas emissions to compliance with certain human rights standards. Among other benefits, sustainability taxonomies can:

  • assist investors, asset managers and asset owners in identifying sustainable investment opportunities and constructing sustainable portfolios that align with taxonomy criteria;
  • drive capital more efficiently toward priority sustainability projects;
  • help protect asset managers against claims of greenwashing by providing an independent benchmark for the sustainability performance of investments; and
  • guide future public policies and regulations targeting specific economic activities based on taxonomy criteria.

In this series of Blog Posts, we first provide a brief overview of some of the key existing and developing taxonomies around the world. We then set out our analysis of the ways asset managers are already leveraging taxonomies in their businesses based on a review of publicly available responsible investment reports.  Finally, we highlight certain challenges that asset managers may encounter as these systems develop and interest in sustainable investing continues to grow.

Continue reading this Part II for our analysis of how asset managers are already leveraging taxonomies. You can find Parts I and III here and here.


Continue Reading Leveraging Taxonomies: How Asset Managers Are Using New Sustainability Classification Systems – Part II

The sustainable investing market is witnessing remarkable growth: since 2018, annual cash flows into sustainable funds have increased tenfold. Now, more than ever, investors and asset managers alike seek sustainable products and strategies offering robust financial returns. The field, however, has been haunted by greenwashing claims and a lack of consistency in identifying what, exactly, makes an investment “sustainable”.

Sustainability or “green” taxonomies developed by governments, international bodies and non-governmental organizations (NGOs) can help resolve these challenges and inconsistencies by identifying specific assets, activities or projects that meet defined thresholds and metrics that quantify sustainability. These systems can cover the full spectrum of sustainability topics, from achieving acceptable levels of greenhouse gas emissions to compliance with certain human rights standards. Among other benefits, sustainability taxonomies can:

  • assist investors, asset managers and asset owners in identifying sustainable investment opportunities and constructing sustainable portfolios that align with taxonomy criteria;
  • drive capital more efficiently toward priority sustainability projects;
  • help protect asset managers against claims of greenwashing by providing an independent benchmark for the sustainability performance of investments; and
  • guide future public policies and regulations targeting specific economic activities based on taxonomy criteria.

In this series of Blog Posts, we first provide a brief overview of some of the key existing and developing taxonomies around the world. We then set out our analysis of the ways asset managers are already leveraging taxonomies in their businesses based on a review of publicly available responsible investment reports.  Finally, we highlight certain challenges that asset managers may encounter as these systems develop and interest in sustainable investing continues to grow.

Continue reading this Part I for a better understanding of existing and developing taxonomies around the world. You can find Parts II and III here and here.


Continue Reading Leveraging Taxonomies: How Asset Managers Are Using New Sustainability Classification Systems – Part I

In order to implement the “Plan for the Reform of the Legal Disclosure System of Environmental Information” issued by China’s Ministry of Ecology and Environment (MEE) in May 2021, the MEE has issued new disclosure rules (Rules) that will require domestic entities to disclose a range of environmental information

The Brazilian Securities Commission (CVM) issued, on December 22, 2021, CVM Resolution No. 59 (RCVM 59), which amends CVM Rule No. 480 (CVM Rule 480). This new normative arises from Public Consultation No. 09, closed in March 2021, and brings substantial innovations on the informational regime for issuers of securities. Indeed, the reform promotes a reduction in the cost of compliance for issuers and greater accessibility of information to investors by eliminating redundancies and simplifying the content required in the Reference Form, the main document of publicly-held companies in Brazil.

However, most importantly, through RCVM 59, CVM in an unprecedented way establishes criteria and requirements for the disclosure of information on environmental, social and governance aspects, which was previously a mere deliberation of issuers to attract investors engaged in ESG aspects, and it was not foreseen in any regulation of the autarchy.


Continue Reading Brazilian Securities Commission Establishes ESG Information Disclosure Criteria for Listed Companies

The European Commission has indefinitely postponed its much-anticipated directive on human rights and environmental due diligence (HREDD) – more than 150 days after it was first expected to be published. While the reason for the delay is unclear, 47 civil society organisations have penned an open letter seeking “full transparency on the reasons for the delay and on the decision-making process going forwards.”

Despite this setback, national HREDD legislation continues afoot: laws have been adopted or are in force in France, Germany and Norway, while proposed national legislation is being progressed in a number of other European countries. Most recently, in December 2021, the Netherlands announced its intent to introduce its own national HREDD law in view of the further delay of the proposed EU law.

Legislative developments aside, investors, civil society and other stakeholders are scrutinising how companies identify and mitigate human rights impacts in their operations and supply chains more closely than ever.

And so the message is clear: companies still need to take steps to develop and reinforce their human rights due diligence programmes, both in anticipation of further mandatory HREDD laws and to respond to stakeholder expectations and demands.


Continue Reading Business and Human Rights – EU’s Proposed Mandatory Human Rights and Environmental Due Diligence Law Faces Further Delay

On December 16, 2021, the US Office of the Comptroller of the Currency (OCC) released draft principles for managing exposures to climate-related financial risks (Climate Principles). The OCC regulates national banks, federal savings associations, and federal branches and agencies of foreign banking organizations.

The Climate Principles are targeted at banks with

On December 15, 2021, the Singapore Exchange (SGX) responded to two consultations addressing a range of ESG-related topics that could significantly change the ESG reporting landscape for listed companies in Singapore. The consultations address the implementation of (i) mandatory climate-related disclosures for certain sectors aligned with the Recommendations of the Task Force on Climate-related Financial Disclosures (TCFD), (ii) mandatory diversity-related disclosures for all issuers and (iii) a list of 27 “Core ESG Metrics” to help listed companies align their ESG disclosures with international standards and best practices on a voluntary basis.

As SGX otherwise requires ESG reporting on a comply-or-explain basis only, these proposals represent a shift toward an increased focus on mandatory climate and diversity disclosures that, in particular, has taken hold among Asian regulators. Just this month, the Stock Exchange of Hong Kong implemented mandatory gender diversity requirements and Hong Kong’s Cross-Agency Steering Group reported “progress towards mandating climate-related disclosures aligned with the TCFD framework by 2025 across relevant sectors”, while a group of Malaysian regulators announced their intention to implement mandatory TCFD disclosures by the end of 2024.

In this Blog Post, we highlight key aspects of the recent SGX announcements and provide guidance on how companies are already implementing ESG frameworks incorporating TCFD and more.


Continue Reading Singapore Regulator Prioritizes TCFD, Diversity and ESG Metrics in New Disclosure Rules and Guidance