“Asset owners increasingly recognise that [ESG] factors are a proxy for overall management quality and long-term sustainability.
“So it is no longer enough for asset managers to simply make the claim that they take ESG factors into account, without making clear to investors how they do this,” Alder said at a speech during the Bloomberg Buyside Summit.
In Hong Kong, the Securities and Futures Commission has had an increase in applications for funds with a green or sustainability focus, according to Alder. As a result, the SFC will now evaluate ESG disclosures more closely.
“We will continue our efforts in this area to minimize the possibility of greenwashing.”
The SFC will soon carry out a survey to find out more about how asset managers integrate ESG factors into their investment processes, he said.
A number of regulators globally have already taken steps to develop more consistent disclosure or labelling guidelines for ESG-focused products, with Europe at a more advanced stage, according to Alder.
“Much more needs to be done in relation to consistent, decision-useful corporate and asset management disclosures. And finally, how to embed climate change disclosures into enforceable rules when scenarios mainly describe long-term financial risks.
“In other words, what would a disclosure breach look like and what should the response of market regulators be to any breach?”