Hong Kong seeks global ESG standard adoption to reduce greenwashing

The chairman of Hong Kong’s Securities and Futures Commission (SFC) has revealed the regulator is looking to adopt global ESG standards to prevent cases of greenwashing.

According to Regulation Asia, SFC chairman Tim Lui stated that the regulator is also scrutinising ESG disclosures by listed companies, with the global ESG standards currently in development.

While the vast range of ESG standards and ratings in the market can sometimes be inconsistent, Lui remarked that there are steps regulators can take to make ESG information more comparable, consistent and decision-useful.

The SFC chairman highlighted the work the regulator has done with the government of Hong Kong and other local regulators to make finance in the country more sustainable, including the establishment of the country’s Green and Sustainable Finance Cross-Agency Steering Group in May last year.

Lui remarked, “Providing clear guidance for asset managers sends an important message. Asset managers are expected to do more to make it clear to investors how they take ESG factors into account. Fund managers will then expect the companies they invest in to explain clearly how they manage the climate-related risks of their operations.”

He noted that the SFC is currently evaluating ESG disclosures ‘much more closely’ alongside looking for new ways to reduce the possibilities for greenwashing. These ways including participating in the development of a global baseline of sustainability disclosure standards, led by the International Sustainability Standards Board (ISSB) – with Lui claiming that the SFC is exploring the potential ways ISSB standards can be adopted in Hong Kong when they are developed.

He remarked, “These standards will be a key part of Hong Kong sustainable finance strategy. This will set up clear regulatory expectations for the financial sector. It will also help make corporate disclosures more transparent, reliable, and comparable.

“We want investors to have the best available information about the impact of the listed companies and funds they invest in, so they can make more informed decisions.

“This is just a start. A lot more needs to be done to make sure that companies and fund managers’ green claims are substantiated by clear and transparent ESG data. And a lot more needs to be done to harmonise standards and frameworks, and to channel investments to where they are needed to transition to a more sustainable economy. We look forward to working with all our partners at home and to achieve these goals.”

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