SFC CEO: Asset Managers Must Clarify How They Look at ESG

Ashley Alder, the chief executive officer (CEO) of the Securities and Futures Commission (SFC), gave a speech this Friday outlining the regulator’s views on investments that look at environmental, social and governance (ESG) measures.

In a speech published on the regulator’s website, Alder said that the SFC - along with other regulators around the globe - is developing rules that will encourage ESG investment.

The CEO said that it takes seriously global warming predictions, noting that climate change is likely to cost $6.9 trillion per year in the near future.

As a result, regulators are looking at how they can force firms to make changes to their behavior to ensure they are not harming the environment.

Potential changes to Regulation Regulation Like any other industry with a high net worth, the financial services industry is tightly regulated to help curb illicit behavior and manipulation. Each asset class has its own set of protocols put in place to combat their respective forms of abuse.In the foreign exchange space, regulation is assumed by authorities in multiple jurisdictions, though ultimately lacking a binding international order. Who are the Industry’s Leading Regulators?Regulators such as the UK’s Financial Conduct Authority ( Like any other industry with a high net worth, the financial services industry is tightly regulated to help curb illicit behavior and manipulation. Each asset class has its own set of protocols put in place to combat their respective forms of abuse.In the foreign exchange space, regulation is assumed by authorities in multiple jurisdictions, though ultimately lacking a binding international order. Who are the Industry’s Leading Regulators?Regulators such as the UK’s Financial Conduct Authority ( Read this Term include firms being made to disclose how their operations have a negative impact on the environment.

Clear ESG policy

On top of this, Alder said that financial institutions might be required to look at how their investments may be affected by - for better or worse - changes in the climate.

More specifically, the SFC CEO said that asset managers might be required to explain how they take ESG into account when making their investment decisions.

“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,” said Alder.

“Our hope is that if policy makers, regulators and industry participants can pull together, we will see the emergence of compelling, market-driven solutions to critical climate risks.”

The SFC is not the only regulator to start taking substantive measures on climate change.

Earlier this month, Japan’s Financial Services Agency announced the creation of a new role - a chief sustainability officer.

Other major regulators, including the Financial Conduct Authority, have also taken steps to bolster ESG investment in their respective countries.