HKSFC proposes climate rules for funds

The Hong Kong Securities and Futures Commission has issued a consultation paper on the disclosure of climate-related risks by fund managers.

The proposal would add significant requirements on climate change towards fund managers under a tiered approach with managers with AUM of HK$ 4 billion or above subject to enhanced requirements. SFC proposes a 9- to 12-month transition period for large fund managers and a 12-month period for others. The requirements would be mandatory for managers of collective investment schemes (CIS) but not for discretionary accounts.

The proposal pushes the envelope in two key ways: While the proposal’s four-element framework (governance; investment management; risk management; and disclosure) is fairly routine, the proposal pushes the envelope in two notable ways: (1) quantitative disclosures of weighted average carbon intensity (WACI) is required at fund level for large fund managers, covering scopes 1 & 2 emissions; and (2) managers are encouraged to look beyond their investment horizon.

Thanks to Ronald Wu of UBS.