In order to boost Hong Kong’s status as a green financial centre, the Securities and Futures Commission (SFC) is supporting the development of a voluntary code of conduct for environmental, social and governance (ESG) ratings and data products providers in Hong Kong.
The voluntary code of conduct (VCoC) will be developed through a 14-member industry-led working group. The SFC, the Hong Kong Monetary Authority and the Insurance Authority will attend as observers.
“The Voluntary Code of Conduct will help strengthen the transparency, quality and reliability of ESG information used by licensed corporations in their investment decisions,” said Julia Leung, the SFC’s chief executive officer. “This is an important initiative to mitigate the risk of greenwashing in investment products.”
It is expected that VCoC will align with international best practices as recommended by the International Organization of Securities Commissions (IOSCO) and relevant expectations introduced in other major jurisdictions.
According to the SFC website, it will have four key elements: transparency, governance, systems of control and management of conflicts of interest.
The working group is likely to hold its first meeting in November, it and plans to issue draft guidelines for public consultation early next year.
The initiative is the culmination of the SFC’s fact-finding exercise and industry outreach conducted since mid-2022 to understand matters related to the ESG ratings and data products providers, which are not regulated by the SFC.
The exercise found that surveyed asset managers highlighted common concerns about data quality, transparency, and conflicts of interest management of the providers, and that the IOSCO recommendations should be encouraged for adoption by ESG ratings and data product providers.
