CFA Institute responds to the SFC’s proposal to amend the Fund Manager Code of Conduct to require fund managers of collective investment schemes to consider climate-related risks when making investment decisions and to make appropriate disclosures.
The Securities and Futures Commission (Hong Kong SAR, China) proposes to amend the Fund Manager Code of Conduct to require fund managers of collective investment schemes (but not those who manage discretionary accounts) to consider climate-related risks when making investment decisions and to make appropriate disclosures.
The changes aim to increase awareness of the impact of carbon emissions on the climate among investors, to ensure that fund managers consider climate risk, to meet investors’ demand for actionable information, and to combat greenwashing.
CFA Institute believes that integration of material ESG factors is an important component of a complete and thorough financial analysis. We support initiatives that advance the availability, quality, consistency, and comparability of ESG information available to investors.
In the response to the consultation paper, CFA Institute and CFA Society Hong Kong express a broad agreement with the proposed changes. In particular, we support the requirement that fund managers disclose, on the entity level, their approach, process, and governance as related to climate-related risks, including cases when they are deemed irrelevant. We agree that passive investment strategies should not be exempted from the requirements, but discretionary accounts should, at least initially. However, we have reservations regarding the requirement that large fund managers disclose weighted average carbon intensity (WACI), as there are potential issues with data availability and the usefulness of the measure to investors.