On 29 October 2020, the Securities and Futures Commission (the “SFC”) published a consultation paper on the Management and Disclosure of Climate-related Risks by Fund Managers (the “Consultation Paper”) proposing to amend the Fund Manager Code of Conduct (the “FMCC”) to take climate-related risks into consideration in their investment and risk management process as well as to make appropriate disclosures to meet investors’ growing demand for climate risk information and to combat “greenwashing”.
Further, the SFC proposes to issue a circular setting out baseline requirements and enhanced standards for larger fund managers, with the aim to improve the comparability of information across different fund managers to help investors make more informed decisions. A draft of the circular can be found in Appendix 2 of the Consultation Paper.
The proposed requirements would apply to fund managers which manage collective investment schemes but at the initial stage they would not be mandatory for fund managers which manage discretionary accounts. The proposed requirements would cover (1) governance, (2) investment management, (3) risk management, and (4) disclosure. The proposed requirements in governance, investment management and risk management would apply to fund managers which have discretion over investment management and risk management process, irrespective of whether they are overall responsible or manage only part of a fund. The proposed disclosure requirement, however, would be applicable to fund managers which are responsible for the overall operation of funds, meaning that they are not appliable to those who manage only part of a fund.
While the proposed baseline requirements would apply to all fund managers, their implementation would be subject to the principle of proportionality having regard to factors such as the size and complexity of a fund manager’s business and the investment strategies adopted by the funds under its management.
The consultation concluded on 15 January 2021. The SFC will issue a consultation conclusion together with the final form of the proposed requirements in due course. Fund managers should assess the applicability of such requirements to their investment models based on the proposed governance, investment management, risk management and disclosure requirements.