SFC sets out roadmap for green and sustainable finance
Introduction
Since its release of the Strategic Framework for Green Finance in
September 2018 (“2018 Strategic
Framework”), the Securities and Futures Commission (“SFC”) has been playing a significant role in promoting Hong Kong as
a regional green finance centre. The SFC has since then developed policies,
designed regulatory framework and formed task force to achieve the various goals
set out in the 2018 Strategic Framework. On 2 August 2022, the SFC published
its Agenda for Green and Sustainable Finance (“Agenda”), setting out further steps to be taken by SFC in support
of Hong Kong’s green finance development and transition to a greener economy.
The
focus area
Under the Agenda, the SFC set out three main focus areas, namely:
1.
corporate disclosures;
2.
monitoring the implementation of and enhancing existing measures; and
3.
a regulatory framework for carbon markets.
Corporate Disclosures
The SFC has endeavoured to align with the approach adopted by the
International Organization of Securities Commissions (“IOSCO”) and has actively evaluated and gathered feedback on how
the disclosure requirements proposed by the International
Sustainability Standards Board (“ISSB”)
can be applied in Hong Kong.
With the aim to formulate a comprehensive global baseline for climate related
disclosures that will provide decision-useful information for investors, the SFC will continue to support the work of the new ISSB and
sustainability disclosures through:
1.
continuing to work with the Stock Exchange of Hong Kong Limited (the “Stock Exchange”) on a proportionate
approach to corporate disclosure requirements that are aligned with global
baseline standards;
2.
considering how
the requirements in the new ISSB climate standard Exposure Drafts could be adopted as part of Hong Kong’s domestic reporting framework;
3.
engaging with
the China Securities Regulatory Commission on the use of the ISSB climate
standard to enhance cross-border consistency; and
4.
continuing to
participate in the work of IOSCO on corporate sustainability disclosures.
The SFC and the
Stock Exchange will collaborate to form a working group (the “Working Group”) to examine the
readiness of listed companies to report under the proposed ISSB climate
standard and the challenges faced by them, and to consider a framework aligned
with the ISSB climate standard for Hong Kong, such as how issuers are phased in
to make disclosures and the content of such disclosures, as well as assessing
listed issuers’ readiness, capabilities, and data needs and gaps. Further, the
Working Group will also consider certain long-term targets such as the
digitalisation of climate reporting information, capacity building needs, and
the development of an assurance framework in Hong Kong.
Monitoring the implementation of and enhancing existing measures
The SFC has
taken measures in areas including asset management, ESG funds, taxonomy,
education and training and technology and innovation. Going forward, the SFC
will continue monitoring the implementation of the measures by:
1.
continuing to
consider the issues concerning asset manager disclosures in climate-related risks and maintaining regular communication with the industry to monitor the
progress of licensed fund managers’ incorporation of new climate-related risks
conduct and disclosure requirements, as well as providing the necessary
clarification and guidance to fund managers;
2.
continuing to
monitor ESG funds’ compliance with the applicable requirements and engaging with stakeholders to provide guidance to investors in order to enhance their
awareness of ESG funds;
3.
continuing to
monitor developments in adopting green and sustainable finance taxonomies,
meaning the systemic classification and definition of items that qualify as
being sustainable or green and may be used as a reference by authorities and
market participants in determining whether their activities or products are
truly sustainable or green, and work with the Green and Sustainable Finance
Cross-Agency Steering Group (“CASG”)
in developing such structure and core elements of a local green classification
framework for consultation;
4.
continuing to
work with the Investor and Financial Education Council to support investor
education through regular updates, publicity campaigns, press events, public
talks and stakeholder collaborations; and
5. continuing to work with CASG members and stakeholders to facilitate the development of technologies to support green and sustainable finance initiatives locally, regionally and internationally.
Regulatory framework for carbon markets
The SFC
recognised the potential in the expansion of China’s carbon markets and Hong
Kong’s strategic role in adding value to such carbon market development. There
are two key types of carbon markets, being (i) voluntary carbon markets
comprising buyers that voluntarily purchase carbon credits generated by
projects that avoid or remove greenhouse gas
emissions to neutralise or compensate for their emissions; and (ii) compliance
markets or emissions trading schemes which provide a regulated mechanism for
market participants to trade allowances for carbon emissions. In this regard,
the SFC will focus on identifying the appropriate regulatory framework on
carbon market opportunities in Hong Kong and continue its work under the Carbon
Market Work Stream set up by the CASG to support Hong Kong’s development of a
greener economy.
Conclusion
In recent years, the SFC has presented clearer roadmap to develop an
effective regulatory framework for green and sustainable finance and to ensure green finance initiatives are properly regulated. Market
players may anticipate more comprehensive policies and regulatory framework to come in
place in the course of time.
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Published by ONC Lawyers © 2022 |