Hong Kong Asset Managers Consider ESG Factors

Hong Kong Asset Managers Consider ESG Factors

The Securities and Futures Commission’s latest survey found 83 percent of firms engaged in asset management considering at least one of the environmental, social and governance factors in their investment decisions.

68 percent of respondents acknowledged ESG factors as a source of financial risk and impact to portfolios. Evidence of their conviction is the activity occurring to influence management on ESG-related matters with 63 percent of respondents practicing responsible ownership through voting and corporate engagement. 

The report was based on a survey of 660 firms engaged in asset management activities and is part of the SFC’s initiative to encourage consideration of ESG factors in investment decision making processes; facilitate the development of green and ESG-related products; and enhance ESG-related reporting by listed companies. 

Intellectual Gap

Despite the acknowledgement of ESG-related risks, respondents still faced the challenge of implementing effective processes, if any at all. 

On climate change-related risks specifically, only 23 percent had processes in place to manage the relevant financial impact. And on a broader basis, 65 percent of respondents did not have any oversight measures to systemically integrate ESG factors in investment and risk management processes. 

Unsurprisingly, 68 percent of asset manager indicated that information about their own ESG practices were not available, despite claiming to give general considerations to the related factors.

Changes

«Local asset management firms lag behind their counterparts with overseas-based parent companies in terms of ESG practices,» the SFC said. «The latter generally have stronger ESG investment processes relating to research and portfolio management, governance and oversight measures, and more of them support international initiatives such as the TCFD and the United Nations Principles for Responsible Investment.»

Nonetheless, the growth outlook remains positive with 64 percent of respondents already planning to develop or enhance ESG practices over the next two years regardless of whether or not they are currently involved in the space. In addition, more are considering public disclosure about ESG investment practices and climate risk management to reduce «greenwashing» and showcase real strength in related capabilities.