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Implementation of climate disclosure by investment managers - APAC

Insight 6 April 2022

Implementation of climate disclosure by investment managers - APAC

Three guidelines on ESG have been issued in the APAC region with the intent to drive the transition to a green economy through integrating environmental risk considerations in investment decisions. Although these three publications can seem like different requirements, they are very similar with a similar path to implementation which we explore in this article.

During June 2017, the Task Force on Climate-related Financial Disclosures (TCFD) published recommendations on climate-related financial disclosures that are applicable to organisations across sectors and jurisdictions.

Importantly, the Task Force’s recommendations apply to financial-sector organisations, including banks, insurance companies, investment managers, and asset owners.

On 8 December 2020, the Monetary Authority of Singapore (“MAS”) issued Guidelines on Environmental Risk Management aimed at investment managers. On 20 August 2021, the Hong Kong Securities and Futures Commission (“SFC”) issued a circular on the Management and disclosure of climate-related risks by investment managers.

These guidelines are intended to drive the transition to a green economy through integrating environmental risk considerations in investment decisions. Although these three publications can seem like different requirements, they are very similar with a similar path to implementation which we explain below:

There are four or five key areas for investment managers to look into for their compliance with the guidelines:

There are a lot to consider during each step and the results will differ for each investment manager and each fund, but below is the standard process and recommended steps to follow for implementation:

  • Identify a list of climate-related risks and opportunities
  • Determine the materiality of each risk and opportunity with the likelihood and magnitude
  • Engage stakeholders to understand driving forces and potential mitigating actions
  • Conduct gap analysis to determine level of current disclosures relative to the specific reporting guideline or regulation and ensure climate-related risks and opportunities drive the governance, strategy and risk management areas
  • Create an action plan to report to the specific reporting guideline or regulation
  • Prepare a best practice data collection process for the most material metrics and targets
  • Include in the data collection action plan the validation of data and review of information
  • Ensure the service level agreement with your administrator or third-party vendor selected to offer this reporting service includes the data collection and validation requirements and deadlines

Download the PDF version of the article here

Watch our latest webcast in partnership with Ogier where we discuss the practical experiences in advising and supporting asset managers in their journeys to meet these sustainability standards.

Webcast | Sustainable investment - From regulation to implementation

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Asia Pacific
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Karlien De Bruin Global Head of ESG - South Africa
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Catherine Law Head of Business Development, APAC - Hong Kong
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