GreenCo has introduced new digital assessment and management tools to respond to the megatrend of sustainable funds. In the wake of burgeoning developments in green finance, more and more global business leaders, investors and regulators are requesting for greater actions on sustainability. While there are many rating services in the market, GreenCo’s new solutions focus on providing tailored-made models for fund managers who face challenges in integrating ESG into decision-making.
GreenCo’s solutions enable fund managers to keep up with the shift by building a strategic framework and climate risk management policy. Taking further steps to establish evaluation tools and adopt proactive approach to integrate ESG factors can also be a tactical strategy for fund managers to expand business network and be socially friendly.
GreenCo, as an ESG solution provider in Hong Kong focusing on developing fund manager friendly solutions, assists fund managers to develop a firm-level ESG policy and disclose climate related risks. Since having a basic or comprehensive ESG policy alone is not enough to satisfy prevailing market expectations, in addition to policy development, GreenCo also provides concrete solutions for ongoing ESG evaluation and integration.
Max Tsang, Director of GreenCo, aims to provide customised ESG support to fund managers. He says, “We all know and support Sustainalytics, Robeco, MSCI ESG Rating, Refinitiv, FactSet, Bloomberg etc. in promoting ESG intelligence. All of them are reputable rating and scoring solution providers. Nevertheless, their coverage still focuses on sizable public companies. Fund managers and analysts still face the challenges of limited rating and score benchmark for small and medium sized public companies and private company or projects. On the other hand, many fund managers want to involve in setting scoring algorithm and criteria included in the evaluation process. Through GreenCo, fund managers can have full control on the evaluation mechanism tailor-made for their funds. This allows them to balance and consider opinion from their stakeholders.”
The first tool, ESG Performance Evaluation Tool, captures the principal sustainability impacts of investment decisions on ESG factors, as well as developing policies of integrating sustainability risks into decision-making processes. Fund managers can quantify the environmental, social and corporate governance characteristics of products, while performing accurate and timely benchmarking against self-selected comparable companies from various sustainability dimensions. Through our ESG evaluation tool, it is possible for fund managers to build up their own in-house scoring and rating tool.
The second tool, Corporate Carbon Management Tool, is a digital platform where fund managers can easily calculate and evaluate carbon footprint in a scientific manner. Fund managers who assess the carbon performance of investee companies for active engagement, analyse its portfolio’s exposure to carbon-intensive companies through Weighted Average Carbon Intensity (WACI), or build plans and goals for addressing climate-related risks as part of governance processes, can automatically obtain an overview of the GHG profile. Moving forward, fund managers can positively influence the emission targets of the investee companies.
Tom Liu, Principal Consultant of GreenCo, has been dedicated to modelling a customised system that can effectively address the ESG risks in fund management and disclosure. He said, “The world is increasingly faced with the catastrophic and unpredictable consequences of climate change, resource depletion and a range of sustainability‐related issues, which are posing short-, medium- and often long-term threats to businesses. While sustainable finance is widely advocated by international organisations and business initiatives nowadays, the most urgent action should start from mobilising the capital to facilitate the change towards sustainable development and shift global financial flows away from nature-negative outcomes towards nature-positive outcomes. This, however, requires asset managers to set up and implement a robust ESG policy framework and professional tools for sustainability impact quantification.”
Latest Global Development in Green Finance
On 29 October 2020, Hong Kong’s Securities and Futures Commission (SFC) published its Consultation Paper on the Management and Disclosure of Climate-related Risks by Fund Managers, in which SFC proposed new mandatory requirements for Hong Kong fund managers of collective investment schemes (CIS) around climate-related risks, as an action to address the implications of climate change and in response to the strategic framework announced in 2018 to support the development of green finance in Hong Kong. The proposed requirements and transition periods will be subject to the outcome of the Consultation conclusions.
In Europe, the Sustainable Finance Disclosure Regulation (SFDR) imposed mandatory ESG disclosure obligations for all financial market participants and financial advisors in the European Union with substantive provisions of the regulation effective from 10 March 2021 for entity level disclosure on Level 1. Product level disclosure (Level 2) will be required from 1 January 2022.