Climate change: Hong Kong orders managers of at least US$1 billion in assets to disclose their investees’ emissions data
- Up to a tenth of Hong Kong’s licensed asset managers will be required to disclose greenhouse gas emissions data of their investees
- The requirement takes effect from November 2022, according to the Securities and Futures Commission (SFC)
Up to a tenth of almost 2,000 Hong Kong licensed asset management firms will be required to disclose greenhouse gas emissions data of their investment portfolios and investees from November 2022, according to the city’s securities watchdog agency.
They, as well as those below the threshold, will also be required to set up in 12-15 months governance structures and policies to assess, disclose and manage climate risks and opportunities.
Greenwashing is the creation of an impression of higher than actual sustainability benefits.
The Hong Kong units of large international funds are likely to have little difficulty in meeting the requirements, as they can tap into their headquarters’ experience and resources. Local medium-sized funds are likely to face challenges, fund managers and data consultants said.
Fund managers are also likely to run into difficulties in obtaining emission data from some companies listed in mainland China and from other Asian markets where the disclosure of emissions data is not mandatory. In Hong Kong, it is required since July.
“Fund managers can’t do the report on their own without the cooperation of their investees,” said Elsa Pau, founder and CEO of BlueOnion, which runs a financial portal that tracks sustainability data on 8,000 companies and 147,000 funds. “A lot of Asian investors, especially in the fixed income space, will find it hugely challenging getting not only climate data, but even basic ESG scores, due to limited power to influence the management of their large number of investees.”
Judy Li, the Asia Pacific financial services sustainability leader and partner at EY, said most fund managers will require help from ESG specialists, who are in short supply.
However, there is a clear trend for regulators in most jurisdictions to make environment data disclosure mandatory, which will make it easier in the long term for fund houses to comply with their own disclosure requirements, she noted.
Suvir Mukhi, the co-chief investment officer of Income Partners which manages around US$2.8 billion of fixed income assets, said it has been able to get some 80 per cent of the carbon emissions data needed to meet SFC requirements for the main funds it manages, from third-party vendor MSCI.
“We will work to improve this by doing some of our own research and we have been engaging with those investees,” he said. “For a small segment of [investee] companies, it may be a bit challenging, especially the smaller and privately-owned ones. But we will give them more time instead of disposing of those investments since there is still time ahead of the rules’ implementation.”
