Global Law Experts Logo

Find a Global Law Expert

Specialism
Country
Practice Area
awardsr

Awards

Since 2010, the Global Law Experts annual awards have been celebrating excellence, innovation and performance across the legal communities from around the world.

ESG Series - SFC Circular on ESG Funds to become effective on 1 January 2022

posted 3 years ago

By Rossana Chu, Ricky Ho:

On 29 June 2021, the Securities and Futures Commission (“SFC”) issued a circular[1] to set out its expectations on SFC-authorized unit trusts and mutual funds which incorporate environmental, social and governance (“ESG”), climate change and/or sustainability factors (“ESG factors”) as their key investment focus (“ESG Funds”) with a view to improve their comparability, transparency, and visibility (the “Circular”).

From 1 January 2022, the Circular will become effective and supersede an earlier circular issued by the SFC in April 2019 (the “2019 Circular”). In this article, we will revisit the applicability of the Circular and the key enhanced disclosure and reporting requirements imposed under it.

Which type of funds does the Circular apply to?

The Circular applies to ESG funds, which are defined to be SFC-authorized funds which incorporate ESG factors as their key investment focus and which reflect such focus in their investment objectives and/or strategies.

Undertakings for Collective Investment in Transferable Securities (also known as UCITS) will also fall within the scope of the Circular if they incorporate ESG factors as their key investment focus and which reflect such focus in their investment objectives and/or strategies. However, they will be deemed to have complied with the requirements imposed under the Circular if they meet the disclosure and reporting requirements applicable to Article 8 or Article 9 funds under the European regulation on sustainability-related disclosures in the financial services sectors.

The SFC maintains a publicly accessible central database of all ESG Funds, including UCITS ESG Funds, on its website[2] (the “Database”). Key features of all ESG Funds will be listed in the Database after the Circular becomes effective to increase transparency.

Name of fund

The name of a fund or a product shall not be misleading. For an ESG Fund, the reference to ESG or similar terms in its name should accurately and proportionately reflect the ESG features but not to overstate such features. A fund which is not an ESG Fund should not carry a name or market itself as an ESG Fund, except with the SFC’s permission which may be granted on a case-by-case basis.

What are the enhanced disclosure requirements?

Pursuant to Code 6.1 of the Code on Unit Trusts and Mutual Funds issued by the SFC in January 2019, an offering document should contain sufficient information to allow investors to make informed investment decisions.

Following such principle, the Circular requires an ESG Fund to disclose in its offering document information regarding (i) its ESG focus, (ii) its ESG investment strategy, (iii) its expected or minimum proportion of ESG investment in terms of net asset value, (iv) any reference benchmark, and (v) related risks and limitations.

An ESG Fund is also required to describe the following information on the offering documents, its website or through other means:

  1. how its ESG focus is measured and monitored through its lifecycle;
  2. methodology for measuring its ESG focus and its attainment of the same;
  3. due diligence carried out in respect of the ESG-related attributes of its assets;
  4. any engagement policies, including proxy voting policies; and
  5. sources and processing of ESG data or assumptions made where no such data is available.

Such information should be reviewed and updated from time to time in order to ensure accuracy.

Periodic assessment and reporting requirements

The Circular requires an ESG Fund to conduct periodic assessment of the attainment of its ESG focus at least annually and disclose the result of such assessment to its investors through appropriate means, for example in its annual report. The disclosure should cover how it has attained its ESG focus during the assessment period, the basis of the assessment performed (including any estimations and limitations), and comparison between the current and at least the previous assessment period.

Fund managers’ duty to monitor ESG Funds on an ongoing basis

The Circular requires the fund manager of an ESG Fund to monitor and evaluate investments made by the ESG Fund to ensure that its ESG focus is achieved and the Circular is complied with. If an ESG Fund ceases to pursue an ESG focus, the fund manager must inform investors and the SFC as soon as practicable.

Additional guidance for climate funds

The Circular provides additional guidance for ESG Funds with a climate-related focus. The following economic activities are given as examples of a climate-related focus:

  1. contribute to climate change mitigation or adaptation;
  2. seek lower carbon footprint as compared to reference benchmark;
  3. contribute to reduction of greenhouse gas emission;
  4. achieve positive impact to mitigate or adapt to climate change; or
  5. facilitate transition to a low carbon economy.

The Circular also gives examples on climate-related indicators, disclosures of designated climate benchmarks, and methodologies of measuring climate indicators.

Consequence of failing to comply with the Circular

If an ESG Fund fails to meet the requirements imposed under the Circular, it will be removed from the Database.  More importantly, the SFC may take appropriate regulatory actions against it for compliance breaches, such as failure to meet the investment objective and/or strategy stated in its offering documents.

Next step

The Circular will take effect and supersede the 2019 Circular on 1 January 2022 (the “Effective Date”). Existing ESG Funds (i.e. those that are already listed on the Database) should review their current disclosures and make any necessary updates and revisions by the Effective Date. Applications for new ESG Funds should comply with the requirements under the Circular from the Effective Date, including the submission of a confirmation of compliance.

Going forward, ESG will gain increasing attention.  It is likely that more applications for ESG Funds will be made in the future. However, fund managers should ensure its staff and management receive the necessary training for understanding the enhanced disclosure requirements set out in the Circular. The SFC may take any breach of the Circular by an ESG Fund seriously in order to combat greenwashing.

The authors would like to thank Ms. Cici Ng (trainee solicitor) for her contribution in this article.

Download (pdf)

________________

[1] https://apps.sfc.hk/edistributionWeb/api/circular/openFile?lang=EN&refNo=21EC27

[2] https://www.sfc.hk/en/Regulatory-functions/Products/List-of-green-and-ESG-funds

Note: This material has been prepared for general information purposes only and is not intended to be relied upon as professional advice for any cases. Should you need further information or legal advice, please contact us.

Author

Find the right Legal Expert for your business

The premier guide to leading legal professionals throughout the world

Specialism
Country
Practice Area
LAWYERS RECOGNIZED
0
EVALUATIONS OF LAWYERS BY THEIR PEERS
0 m+
PRACTICE AREAS
0
COUNTRIES AROUND THE WORLD
0

Join

who are already getting the benefits
0
Sign up for the latest legal briefings and news within Global Law Experts’ community, as well as a whole host of features, editorial and conference updates direct to your email inbox. Naturally you can unsubscribe at any time.

Online Casino Reviews

  • Freeroll Poker Tournaments For Real Money
  • Australian Online Casino Real Money
  • Best Slot App To Win Real Money
  • Online Casino Real Money Australia
  • Best Paying Online Pokies
  • Wizard Of Oz Online Slots
  • All Slots Casino Mobile
  • Best Online Poker App Real Money
  • Best Online Casino To Play Roulette
  • Is Online Casino Legal
  • Online Casino That Accepts Paypal
  • Play Roulette For Real Money
  • Slot Apps To Win Real Money
  • Real Money Slots Online Usa
  • Safe Online Casino
  • Wizard Of Oz Slots
  • Real Online Pokies Nz
  • Biggest Online Casino In The World
  • Online Casino Pay With Paypal
  • Online Casino That Accept Paypal
  • Online Casino Canada Real Money
  • 3 Card Poker Online Real Money
  • Online Slots Real Money Canada
  • Best Online Poker Sites For Real Money
  • Real Money Poker App Android Usa
  • How To Make Money From Online Casino Bonuses
  • Real Money Poker App Iphone
  • How To Play Blackjack Online For Real Money
  • Best Slots To Play
  • Top 10 Online Pokies
  • Best Poker Apps Real Money
  • Online Casino Legal
  • Best Payout Online Casino Uk
  • Win Money Online Slots
  • Online Poker Nj Real Money
  • How To Win Online Slots
  • Casino Gaming License
  • Play Real Pokies Online
  • Blackjack Sites For Real Money
  • Real Money Casino Games For Android
  • Best New Online Slots
  • Flaming 777 Slots Games
  • Online Blackjack With Live Dealers
  • How To Play Online Slots
  • Facebook Casino Games Real Money
  • Online Casino With No Minimum Deposit
  • How To Beat Online Slots
  • Online Casino License
  • The Big Payback Slots
  • Royal Vegas Online Casino Withdrawal
  • Online Casino Minimum Deposit 5
  • Online Pokies Real Money Australia
  • Las Vegas Usa Online Casino
  • Real Money Poker App Android
  • Wheel Of Fortune Slots
  • Game Of Thrones Slots
  • Online Poker Real Money Usa Legal
  • Best Online Casino European Roulette
  • Blackjack Online Real Money Paypal
  • Online Video Poker Real Money Usa
  • How To Create An Online Casino
  • Lucky Nugget Online Casino Mobile
  • How To Withdraw Money From Online Casino
  • Platinum Play Online Casino Download
  • Online Casino For Usa Players
  • Best Online Casino Usa Real Money
  • Online Roulette Real Money Usa
  • Best Real Money Poker Sites
  • Android Slots Real Money
  • How To Start An Online Casino Business
  • How To Start An Online Casino
  • How To Start An Online Gambling Site
  • Best Online Casino For Blackjack
  • Play Baccarat Online For Money
  • Online Pokies New Zealand
  • Best Slots To Play At Golden Nugget
  • Slots Of Vegas Online Casino
  • Best Online Pokies Site
  • How To Beat Online Roulette
  • New Zealand Online Pokies
  • Online Poker Mobile Real Money
  • Which Online Slots Payout The Most
  • Is Online Casino Legal In India
  • Online Casino Software For Sale
  • Best Online Casino For Craps
  • Hard Rock Casino Slots
  • Win Real Money Online Pokies
  • Online Casino With Highest Payout Percentage
  • Poker Apps With Real Money
  • Online Roulette Real Money Review
  • Full Tilt Poker Real Money
  • Online Casino 5 Dollar Minimum Deposit
  • Online Roulette With Real Money
  • Best Online Roulette For Real Money
  • I Migliori Casino Online Italiani
  • Best Payout Online Slots
  • How To Play Baccarat Online
  • Play Casino Card Game Online
  • Play Blackjack Online For Real Money
  • Best Paying Online Slots
  • Casino License Cost
  • Online Poker Real Money California
  • Safe Online Casino Australia
  • Online Roulette Australia Real Money
  • Online Poker Real Money Texas
  • Online Roulette Real Money Paypal
  • Online Slots Australia Real Money
  • Golden Nugget Online Casino Review
  • Casino Games To Win Real Money
  • Online Pokies Australia Real Money
  • Online Gambling Blackjack Real Money
  • Win Real Money Playing Slots
  • How To Win Roulette Online
  • Aristocrat Pokies Online Real Money
  • Hollywood Casino Online Slots
  • Play Online Keno For Real Money
  • What's The Best Online Casino
  • Triple Double Diamond Slots
  • Play Roulette Online With Real Money
  • Roulette Online For Real Money
  • Play Roulette Online Real Money
  • Best Online Pokies Real Money
  • Big Red Pokies Online
  • How To Win At Online Blackjack
  • What Is The Best Online Roulette Site
  • Real Money Online Pokies
  • Spin To Win Slots
  • Ruby Slots Online Casino
  • Wheel Of Fortune Online Casino
  • Spin Palace Flash Casino Online
  • Online Poker Real Money App
  • Online Casino With Paypal Deposit
  • How To Win At Online Roulette
  • Can You Win Real Money On Slot Apps
  • Is Ignition Casino Safe
  • Online Casino Blackjack Real Money
  • Online Casino Win Real Money Usa
  • How To Make Money Online Casino
  • Online Casino Real Money Reviews
  • Slot Games To Win Real Money
  • Jackpot City Online Casino Download
  • Online Pokies Real Money
  • Casino War Online Real Money
  • Online Casino No Minimum Deposit
  • Play Wheel Of Fortune Slots Online
  • Best Online Casino Game To Win Money
  • Online Casino Without Wagering Requirements
  • Online Slots For Real Money Usa
  • Legal Online Casino Australia
  • How Do Online Slots Work
  • Best Online Casino For Us Players
  • Online Play Casino Roulette Game
  • Online Blackjack Real Money Australia
  • Real Casino Games Real Money Online
  • Online Slot Machines Real Money Paypal
  • The Best Online Casino For Roulette
  • What Online Casino Pays Out The Most
  • Start Your Own Online Casino
  • Legal Online Casino
  • Online Live Roulette Casino Game
  • Playing Blackjack Online For Real Money
  • Online Penny Slots Real Money
  • Best Online Blackjack For Money
  • How To Win Online Roulette
  • Real Money Poker Sites Usa
  • Best Time To Play Slots
  • Online Keno For Real Money
  • Best Payout Online Slots Uk
  • Online Slots Real Money Reviews
  • Best Online Pokies Nz
  • What States Allow Online Gambling
  • Best Real Money Poker App
  • Online Slots To Win Real Money
  • Real Money Slots App Iphone
  • Jackpot City Flash Casino Online
  • Ignition Casino Legit
  • All Star Slots Casino
  • How To Play Online Casino
  • Real Time Gaming Slots
  • Online Video Poker Real Money
  • How To Play Roulette Online For Money
  • How To Win On Online Slots
  • Age Of Gods Slots
  • Online Real Casino Money Games
  • Best Online Slots To Play
  • Online Poker California Real Money
  • Is Jackpot City Casino Legit
  • How To Win At Online Slots
  • Play Poker For Real Money
  • Safe Online Pokies Australia
  • Best Way To Play Slots
  • How To Play Casino Online
  • Play Online Roulette For Money
  • Online Casino Australia Real Money
  • Which States Allow Online Gambling
  • Play Keno Online Real Money
  • How To Win Online Blackjack
  • Online Blackjack With Real Dealers
  • How To Open Online Casino
  • What Are The Best Online Slots To Play
  • Big Win Casino Slots
  • Spin Palace Online Casino Australia
  • Best Slots To Win On
  • Casino Slots Win Real Money
  • Slots Magic Online Casino
  • Blackjack Online For Real Money
  • Slot Machine App Win Real Money
  • Online Casino Not Paying Out
  • Slots That Pay Out Real Money
  • Online Pokies Australia Reviews
  • Online Casino Minimum Deposit 1
  • Jackpot City Online Casino Review
  • Live Dealer Baccarat Online Casino
  • Online Casino Apps For Android
  • Online Casino Paypal Deposit Australia
  • Online Casino With Live Dealer
  • How To Play Blackjack Online
  • Slots To Win Real Money
  • Wheel Of Fortune Online Slots
  • Play Quick Hit Slots Online
  • Can You Count Cards In Online Blackjack
  • Palace Of Chance Online Casino
  • How To Play Roulette Online
  • Good Slots To Play
  • Which Online Casino Pays Out The Most
  • Heart Of Vegas Casino Slots
  • Best Online Casino For Canadians
  • Australian Online Pokies Real Money
  • Mohegan Sun Online Casino Nj
  • Online Casino Live Games Best Uk
  • Best Online Casino Australia Reviews
  • Play Pokies Online Real Money
  • Best Online Casino For Usa Players
  • How To Win Online Casino
  • Play Blackjack For Real Money
  • Best Slots On Bovada
  • Online Keno Real Money Usa
  • Online Slots Real Money Paypal
  • Best Poker Sites For Real Money
  • Safe Casino Sites
  • The Best Online Slots
  • Play Keno For Real Money
  • Real Online Pokies Australia
  • Queen Of The Nile Slots
  • Mummys Gold Casino Online Casino
  • Play Keno Online For Real Money
  • Best Poker Websites Real Money
  • Lucky Nugget Online Casino Download
  • Best Online Casino For Roulette
  • Play Roulette For Money Online
  • Video Slots Mobile Casino
  • Best Time To Play Online Slots
  • Best Real Money Online Poker
  • Play Blackjack Online With Friends
  • Play Baccarat Online For Real Money
  • Is Silver Oak Casino Legit
  • Big Fish Casino Real Money
  • Can You Win Real Money On Caesars Slots
  • Game Of Thrones Slots Casino
  • Best Online Slots Payout Percentage
  • Play Online Pokies For Real Money
  • Play Pokies Online Australia
  • High 5 Casino Real Slots
  • The Best Online Pokies
  • Online Pokies That Accept Paypal
  • Heart Of Vegas Slots
  • How To Play Online Roulette
  • Best Poker App Real Money
  • Best Online Casino Fast Payout
  • Best Slots At Wind Creek Casino
  • Online Casino 10 Minimum Deposit
  • Play Roulette Online For Money
  • Us Real Money Poker Sites
  • How To Win In Online Casino
  • Best Online Pokies Australia Review
  • Where To Play Roulette Online For Real Money
  • How To Beat Online Casino Slot Machines
  • Highest Payout Online Slots
  • Best Paying Online Casino Slots
  • Golden Tiger Online Casino Review
  • Online Casino With Live Dealers
  • Play Roulette Online For Real Money
  • Best Slots To Play At Casino
  • Slot Machine Games Win Real Money
  • Most Popular Online Casino Games
  • Casino Slots App Real Money
  • Online Casino Real Money Canada
  • Online Real Money Pokies
  • Online Roulette Game Real Money
  • Online Casino Roulette Real Money
  • Best Place To Play Roulette Online
  • Online Casino Book Of Ra Paypal
  • Online Blackjack With Real Money
  • Play Online Blackjack For Real Money
  • Is There A Slot Machine App For Real Money
  • Royal Vegas Online Casino App
  • Best Casino Slots To Play
  • Most Popular Online Slots
  • Best Way To Win At Slots
  • Slots You Can Win Real Money
  • Play Roulette Online Real Money Usa
  • Online Casino Real Money Paypal
  • Online Casino Australia Legal
  • Treasures Of Troy Slots
  • Online Casino For Us Players
  • Where Can I Play Blackjack Online For Real Money
  • Online Casino Paypal Book Of Ra
  • Online Roulette For Real Money
  • Best Online Blackjack Real Money
  • Poker App For Real Money
  • Jackpot Magic Slots Facebook
  • Best Online Casino Real Money Usa
  • Best Online Casino New Zealand
  • The Four Kings Casino And Slots
  • How To Play Slots Online
  • Best Online Pokies Australia
  • Usa Online Slots Real Money
  • Real Money Casino Android App
  • Online Slot Machines That Pay Real Money
  • Online Pokies Real Money Nz
  • Online Pokies Real Money App
  • Play Igt Slots Online
  • Best Casino Slots To Win Money
  • Online Casino Business For Sale
  • Play N Go Slots
  • Poker Apps For Real Money
  • Lucky Slots Real Money
  • All Slots Online Casino
  • Best Online Pokies Real Money Australia
  • Online Pokies Win Real Money
  • Best Online Casinos For Roulette
  • Pay Slots For Real Money
  • Best Online Poker Real Money
  • Slots App Win Real Money
  • Play Online Roulette For Real Money
  • Is Ignition Casino Legit
  • Wheel Of Fortune Slots Online
  • Lotsa Slots Real Money
  • Video Poker Online Real Money
  • Online Slots Usa Real Money
  • Play Blackjack Online Real Money
  • Jackpot City Online Pokies
  • Video Slots Online Casino
  • Is 888 Casino Legit
  • Online Slot Games That Pay Real Money
  • Prepaid Visa Card Online Casino
  • How To Stop Online Gambling
  • Best Slots To Play Online
  • Online Blackjack For Real Money
  • Slot Apps For Real Money
  • Mobile Slots Win Real Money
  • Newsletter Sign Up

    About Us

    Global Law Experts is dedicated to providing exceptional legal services to clients around the world. With a vast network of highly skilled and experienced lawyers, we are committed to delivering innovative and tailored solutions to meet the diverse needs of our clients in various jurisdictions.

    Social Posts

    See More:

    Contact Us

    Stay Informed

    Join Mailing List

    GLE