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China - Hong Kong

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.

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

Asset Management

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.

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

Asset Management

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.

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

Asset Management

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.

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

Asset Management

On November 23, 2021, the International Organization of Securities Commissions (IOSCO) issued its “Environmental, Social and Governance (ESG) Ratings and Data Providers” final report in which IOSCO makes 10 recommendations related to the use of ESG ratings and data products in financial markets. In a new Legal Update, we discuss the report and…

Sunrise on a lake

On November 10, 2021, the Association of Southeast Asian Nations (ASEAN) released Version 1 of the ASEAN Taxonomy for Sustainable Finance (the “ASEAN Taxonomy“). First announced in March 2021, the ASEAN Taxonomy will provide a common language for sustainable finance among the ten ASEAN Member States (AMS) that, together, comprise the fifth largest economy in the world. This is a necessary and timely development as ASEAN remains highly vulnerable to climate change, which has had a significant impact on the people, businesses and governments of ASEAN.

Version 1 is a significant step in ASEAN’s sustainability journey, as this initial document will provide the framework for continuing discussions among AMS as the ASEAN Taxonomy develops. In this Blog Post, we highlight key aspects of Version 1 of the ASEAN Taxonomy and compare this new framework against the world’s most prominent sustainability taxonomy, the EU’s Taxonomy Regulation (the “EU Taxonomy“).

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Continue Reading ASEAN Releases Sustainability Taxonomy for Southeast Asia

Wind farm and nuclear power plant

This blog was first published by Law.com

As usual, things ran over, but eventually the parties meeting under the United Nations Framework Convention on Climate Change and, separately but together (kind of), under the Paris Agreement, adopted two “Decisions” by consensus, being CP.26 and CMA.3 respectively.

Continue reading at Law.com.

Products

Climate change could have serious impacts on the mortgage industry, and stakeholders should take action now. That is the recent urgent message from federal regulators and mortgage industry stakeholders.

Recent reports and initiatives from the Mortgage Bankers Association’s Research Institute for Housing America, the White House, the Departments of Housing and Urban Development, Veterans Affairs…

United States - Washington DC

Timed to coincide with the opening of COP26—the UN Climate Change Conference—and citing his prior commitment to cutting greenhouse gas (GHG) emissions by 50-52 percent by 20301 and achieving a net-zero economy by 2050, on November 1, 2021, President Biden announced the launch of the President’s Emergency Plan for Adaptation and Resilience…