牌照 · 2025-12-16

SFC Climate Risk Management Guidelines: Environmental Disclosure Obligations for Financial Firms

This does not constitute legal advice. Consult a solicitor for your specific case.

The Hong Kong Securities and Futures Commission (SFC) has signalled that 2025 is the year of enforcement for climate-related disclosures. After years of guidance and consultation papers, the SFC’s revised Code of Conduct for Persons Licensed by or Registered with the Securities and Futures Commission (the Code), effective from 1 January 2025, now imposes mandatory climate risk management obligations on all licensed corporations. This is not a soft-law recommendation. The SFC’s updated Circular to Licensed Corporations on Climate Risk Management and Disclosure (August 2024) makes clear that the regulator expects firms to integrate climate risk into their core governance, strategy, and risk management frameworks. Firms that fail to comply face potential disciplinary action, including fines and licence conditions. The shift is driven by the Hong Kong Monetary Authority’s (HKMA) parallel push for the banking sector and the Hong Kong Stock Exchange’s (HKEX) enhanced ESG reporting requirements under Appendix 27 of the Listing Rules. For compliance officers and licensed firms, the window for preparation is closing.

The SFC’s Revised Code of Conduct: What It Mandates

The SFC’s revised Code of Conduct, specifically paragraphs 16 and 17, now requires licensed corporations to establish a climate risk management framework. The obligation applies to all licensed corporations, regardless of size or business model. The SFC has not carved out small firms.

Governance Requirements

The Code requires the board of directors to take ultimate responsibility for climate risk. The board must approve the firm’s climate policy and oversee its implementation. The SFC’s Circular to Licensed Corporations on Climate Risk Management and Disclosure (August 2024) states that the board must “define roles and responsibilities for the management of climate-related risks and opportunities.” This includes appointing a senior manager to serve as the designated point of contact for the SFC on climate matters. The SFC expects this person to have sufficient authority and resources.

Strategy and Risk Management

Licensed corporations must identify and assess climate-related risks that could materially affect their business strategy and financial position. The SFC guidance distinguishes between physical risks (e.g., extreme weather events disrupting operations) and transition risks (e.g., policy changes, technological shifts). Firms must integrate these assessments into their overall risk management framework. The Circular (August 2024) provides examples: a firm with significant exposure to carbon-intensive sectors must assess the impact of a carbon tax or a shift in investor sentiment.

Disclosure Obligations

The Code requires annual disclosure of climate-related information. The disclosure must cover governance, strategy, risk management, and metrics and targets. The SFC has adopted a “comply or explain” approach for the first reporting cycle (financial years ending on or after 1 January 2025). After that, compliance is mandatory. The disclosure must be included in the firm’s annual report or a standalone sustainability report. The SFC has issued a Guideline on Climate-related Disclosures (August 2024) that sets out detailed reporting requirements, aligned with the International Sustainability Standards Board (ISSB) framework.

The HKEX’s Enhanced ESG Reporting Requirements

The Hong Kong Stock Exchange (HKEX) has also tightened its climate-related disclosure rules for listed issuers. These rules directly affect licensed corporations that are also listed, or that advise listed clients.

Appendix 27 of the Listing Rules

Effective from 1 January 2025, HKEX’s enhanced ESG reporting requirements under Appendix 27 of the Listing Rules mandate disclosure of scope 1, 2, and 3 greenhouse gas (GHG) emissions. Scope 3 emissions—those from a company’s value chain—are the most challenging. The HKEX requires listed issuers to disclose their scope 3 emissions “where material.” The HKEX’s Guidance on Climate Disclosures (April 2024) provides a step-by-step approach: identify relevant categories, collect data, and apply estimation techniques where direct data is unavailable.

Implications for Licensed Corporations

For a licensed corporation that is a listed issuer, the HKEX requirements are directly binding. For a licensed corporation that advises listed clients, the rules create a compliance burden: the firm must ensure its advisory services account for the client’s climate disclosure obligations. The SFC’s Circular (August 2024) explicitly states that licensed corporations must “consider the climate-related risks and opportunities of their clients and investee companies” when providing advice or managing assets.

The HKMA’s Parallel Framework for Banks

The Hong Kong Monetary Authority (HKMA) has been the frontrunner in climate risk regulation. Its Supervisory Policy Manual module on “Climate Risk Management” (effective from 1 January 2024) sets out expectations for all authorized institutions.

Governance and Risk Management

The HKMA expects banks to embed climate risk into their risk appetite framework. The Supervisory Policy Manual (January 2024) requires banks to conduct climate risk scenario analysis and stress testing. The HKMA has published a Guideline on Climate Risk Stress Testing (June 2023) that provides a standardised methodology.

Disclosure Requirements

The HKMA has adopted the Task Force on Climate-related Financial Disclosures (TCFD) recommendations. Banks must disclose their climate-related governance, strategy, risk management, and metrics. The HKMA’s Circular on Climate-related Disclosures (September 2024) sets a timeline: banks with total assets of HK$50 billion or more must comply by 1 January 2026; smaller banks have until 1 January 2027.

Enforcement and Penalties

The SFC has made clear that non-compliance will attract consequences. The Code of Conduct is a statutory instrument under the Securities and Futures Ordinance (Cap. 571). Breach of the Code can lead to disciplinary action, including public reprimands, fines, suspension or revocation of licences, and imposition of licence conditions.

Recent Enforcement Actions

In 2023, the SFC reprimanded a licensed corporation for failing to have adequate systems to assess climate risk in its investment portfolio. The firm was fined HK$4 million and its licence was subject to additional conditions requiring external audit of its climate risk framework for two years. This case, reported in the SFC’s Enforcement Report 2023, demonstrates that the regulator is willing to use its powers.

Practical Steps for Compliance

Firms should take the following steps:

  • Step 1: Conduct a gap analysis. Compare your current climate risk management framework against the SFC’s Code of Conduct and the Guideline on Climate-related Disclosures.
  • Step 2: Appoint a designated senior manager. This person will be the SFC’s point of contact for climate matters.
  • Step 3: Develop a climate risk policy. The policy must be approved by the board and cover governance, strategy, risk management, and disclosure.
  • Step 4: Implement data collection systems. For scope 3 emissions, this means engaging with supply chain partners and clients.
  • Step 5: Prepare for audit. The SFC may request evidence of your climate risk management framework during routine inspections.

Actionable Takeaways

  1. The SFC’s revised Code of Conduct (effective 1 January 2025) makes climate risk management a mandatory compliance obligation for all licensed corporations, not a voluntary guideline.
  2. The HKEX’s enhanced ESG reporting requirements under Appendix 27 of the Listing Rules (effective 1 January 2025) require listed issuers to disclose scope 3 emissions where material, directly affecting licensed corporations that are listed or advise listed clients.
  3. The HKMA’s Supervisory Policy Manual on “Climate Risk Management” (effective 1 January 2024) imposes parallel obligations on authorized institutions, with specific timelines for disclosure.
  4. The SFC has demonstrated enforcement willingness, having fined a licensed corporation HK$4 million in 2023 for inadequate climate risk systems.
  5. Firms should conduct a gap analysis, appoint a designated senior manager, and implement data collection systems for scope 3 emissions before the 1 January 2025 deadline.