FAQs – Publicly offered investment products: Presentation Materials on ESG fund applications

The Securities and Futures Commission (SFC) has published an updated version of its presentation material regarding common ESG investment strategies used by ESG funds and corresponding frequently asked questions (FAQs) following a recent workshop on January 12, 2023.
The material describes the differences between thematic investments, best in-class investments, and impact investments, before moving on to the criteria to be considered for each type of investment. In other words, the document outlines the requirements an investment must fulfill to be considered „compliant“ with any of the three beforementioned strategies. The document also provides illustrative examples of the disclosure of an ESG fund investment strategy in the Key Facts Statements (KFS) and describes how ESG ratings on stocks or bonds may be incorporated in the selection process for possible investments. The document also briefly addresses the issue of recognition of European UCITS in Hong Kong that are considered ESG funds in line with Article 8 or Article 9 of the Sustainable Finance Disclosure Regulation (SFDR).
In the aftermath of above noted workshop, the document has been updated throughout which is why we recommend an entire review. The newly added FAQs beginning on page 22 are noted below – as quoted:
– What are the criteria for assessing whether a company / investment is related to themes with future ESG targets? (page 22)
– How would the ESG assessment outcome affect the stock selection decision? (page 23)
– How can an ESG fund claim to be an “Impact Investing” fund? (page 25)
– How are ESG fund requirements applied to passive strategies such as index tracking? (page 26)
– Whether an ESG fund must invest primarily in ESG-related investments and what is the threshold of primary investment? (page 30)
– Can a fund which does not fall under the scope of ESG funds pursuant to the SFC’s circular on ESG funds dated 29 June 2021 (“Non-ESG Fund”) include reference to “ESG” or “sustainable” or other similar terms (collectively “ESG Terms”) in its fund name? (page 31)