Climate change means greater urgency for private funding of green projects
SFC CEO wants to promote a greener financial system in Hong Kong, aims to enhance listed companies' climate-related and environmental disclosure reports
The threat of climate change means there is an urgent need for private investment to fund sustainable projects, said Ashley Alder, Chief Executive Officer, Securities and Futures Commission (SFC), at the Bloomberg BuySide Summit on March 22.
In his keynote speech, Alder stated that public funds cannot meet the annual requirement of US$6.9 trillion, estimated by the Organisation for Economic Co-operation and Development (OECD), needed for green investments in energy, transport and infrastructure. This is where private investment needs to step in and financial regulators are assessing how they can enable this.
Alder, who has been CEO since 2011, said the SFC is trying to promote a greener financial system in Hong Kong. This follows from 2018, when the SFC announced a strategy for developing Hong Kong as a leading centre for green finance.
The SFC is working with the Hong Kong Stock Exchange to enhance listed companies’ environmental and climate-related disclosures. Companies will have to disclose not only how their own operations affect the environment, but also disclose scenarios showing how their own financial position will be affected by risks and opportunities from climate change, said Alder. The recommendations of the Task Force on Climate-Related Financial Disclosure, a body led by Michael Bloomberg and Mary Schapiro that aims to encourage companies to provide better climate-related disclosures, were the foundation for this.
Alder emphasized that climate change is a special source of financial risk so these disclosures should not be confused with environmental, social and governance (ESG) or corporate social responsibility (CSR) disclosures. Given that China is moving to require listed companies to make environmental disclosures, it is fitting Hong Kong will follow suit given that the majority of companies listed in Hong Kong are from the mainland, says Alder.
The SFC will also carry out a survey of asset managers to learn about how they integrate ESG into their investment processes, says Alder. As the SFC has received an increase in applications from funds with a green or sustainability focus, it will evaluate ESG disclosures more closely.
Alder said effective market-based solutions to climate risks will depend on three difficult issues. These include global regulatory harmonization to make disclosures more consistent across sectors and regions, achieving consensus on disclosure standards, and how to embed these disclosures into enforceable rules.
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