There has been much talk recently about ESG. What started as a metric for investors to make ethical investment decisions has now grown to encompass how companies should, and are expected to, behave in general. ESG is now a key issue for company boards and management, and an important consideration for shareholders and investors, individual
In a previous blog post, we noted that the International Sustainability Standards Board (ISSB) will shortly publish its proposed general sustainability-related and climate disclosure requirements.
On 31 March 2022, the ISSB published highly anticipated drafts of IFRS S1 General Requirements for Disclosure of Sustainability-related Financial Information (General Requirements Exposure Draft) and IFRS S2 Climate-related Disclosures (Climate Exposure Draft) for public consultation and comments. Each of the Exposure Drafts are accompanied by a ‘Basis for Conclusions’ and ‘Illustrative Guidance’ document. A high-level summary of the proposed requirements is available here.
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.
“Delivering effective corporate governance practices and ESG measures is more than a box-ticking exercise. The change needs to begin with a shift of mindset at the top of the organisations.” – SEHK, December 2021
On December 10, 2021, the Stock Exchange of Hong Kong Limited (SEHK) published the conclusions from its April 2021 consultation on amendments to the SEHK’s Corporate Governance Code (the Code) and Listing Rules intended to promote good corporate governance practices among listed companies and IPO applicants. The final amendments address a range of topics that could significantly change the way that the boards of covered entities operate, including with respect to gender diversity, ESG reporting timelines and the role that ESG plays in corporate governance structures and processes.
In this Blog Post, we highlight final amendments to the Code and the Listing Rules addressing the link between ESG and good corporate governance, ESG reporting and gender diversity at both the board and workforce levels.
On November 26, 2021, Hong Kong’s Mandatory Provident Fund Schemes Authority (MPFA) advanced the Special Administrative Region’s sustainable finance strategy with new Principles for Adopting Sustainable Investing in the Investment and Risk Management Processes of MPF Funds (the Principles). The Principles lay out a high-level ESG integration framework for trustees of Mandatory Provident Funds (MPF), the investment vehicles for the Hong Kong’s mandatory retirement protection scheme, across four key elements: governance, strategy, risk management and disclosure.
In this Blog Post, we provide a brief overview of the Principles and highlight each element, as well as important next steps for MPF trustees. We also provide guidance on how companies are already implementing ESG frameworks similar to the Principles.
On August 20, 2021, Hong Kong’s Securities and Futures Commission (SFC) published its conclusions (the “Consultation Conclusions“) from last year’s consultation (the “Consultation“) on proposed amendments to the Fund Manager Code of Conduct (FMCC) that will require fund managers to consider climate-related risks in their governance, investment and risk management processes. The Consultation Conclusions set out the SFC’s analysis of the responses to the Consultation, as well as the final amendments to the FMCC that will require fund managers to implement a range of climate-related practices as early as August 20, 2022.
In this Blog Post, we provide a high-level overview of the amendments to the FMCC and highlight key takeaways from the Consultation Conclusions as Hong Kong enters a new phase of sustainable fund management.
Continue Reading Hong Kong SFC Finalizes Climate Risk Requirements for Fund Managers
On 20 July 2021, the Hong Kong Monetary Authority (HKMA) issued draft guidelines (the Draft Guidelines) on the management of climate-related risks by authorised institutions (AIs). The Draft Guidelines further develop the HKMA’s approach to climate risk, initially outlined in its June 2020 White Paper on Green and Sustainable Banking, and incorporate leading international standards and practices to provide comprehensive climate risk management guidance for banks in the areas of governance, strategy, risk management and disclosure.
In this Blog Post, we highlight key aspects of the Draft Guidelines and takeaways for AIs considering how to approach these new proposals in Hong Kong. For more information about evolving regulatory approaches to climate disclosure and risk management around the world, please see our comprehensive analysis, Climate Disclosure and Risk Management: Global Approaches.
Continue Reading Hong Kong Proposes Climate Risk Management Guidelines for Banks
On 15 July 2021, Hong Kong’s Green and Sustainable Finance Cross-Agency Steering Group (Steering Group), representing a critical mass of Hong Kong’s financial regulatory bodies, announced next steps to advance green and sustainable finance in the Special Administrative Region (the Announcement). According to the Announcement, the regulators will prioritize:
In this Blog Post, we highlight key aspects of the Announcement and points for market participants to consider as Hong Kong moves toward a more sustainable future.
Hong Kong’s Securities and Futures Commission (SFC) has issued new guidelines on enhanced disclosures required for Hong Kong-authorised funds incorporating environmental, social and governance factors as their key investment focus (ESG funds).
The new guidance, announced on 29 June 2021 via a circular (the Circular), will take effect from 1 January 2022, supplanting existing guidelines last updated in April 2019.
Continue Reading New Hong Kong Guidelines on Enhanced Disclosures for ESG Funds in 2022
On May 4, 2021, the Hong Kong Monetary Authority (HKMA) released the details of its Green and Sustainable Finance Grant Scheme (GSF Grant Scheme), which will consolidate Hong Kong’s existing Pilot Bond Grant Scheme and Green Bond Grant Scheme into one new program. According to the Chief Executive of the HKMA, Mr. Eddie Yue:
“The global green bond market has grown from practically non-existent ten years ago to US$270 billion in 2020. In Hong Kong, we have taken early and proactive steps to strengthen Hong Kong’s position as a regional green and sustainable finance hub, including the issuance of two rounds of Government green bonds since 2019 and the establishment of the Green and Sustainable Finance Cross-Agency Steering Group to coordinate cross-agency market development efforts. The launch of a new [GSF] Grant Scheme to support green and sustainable bond issuance and lending will further enrich the green and sustainable finance ecosystem in Hong Kong.”
Continue reading for more details on the GSF Grant Scheme.
Continue Reading Hong Kong’s New Green And Sustainable Finance Grant Scheme Begins May 10