Global Trustee and Fiduciary Services Bite-Sized Issue 12 2023

Global Trustee and Fiduciary Services Bite-Sized | Issue 12 | 2023 13 QUICK LINKS AIFMD BENCHMARK REGULATION CBDC COSTS & CHARGES CRYPTOASSETS FUND LIQUIDITY LIBOR TRANSITION MiCA OPERATIONAL RESILIENCE UK PRIIPs SUSTAINABLEFINANCE/ESG ASIA EUROPE IRELAND NORTH AMERICA UNITED KINGDOM HKMA Issues Circular on the Sale and Distribution of Green and Sustainable Investment Products On 29 November 2023 the Hong Kong Monetary Authority (HKMA) issued a Dear CEO Circular to all registered institutions (RIs) detailing good practices it observed in a recent review on the sale and distribution of green and sustainable investment products by RIs, and setting out its expected standards. The HKMA notes increasing demand for green and sustainable investment products, and that some RIs have offered such products tomeet customer demand. In light of this, the HKMA conducted a thematic review on RIs (covering retail banks, private banks and corporate banks) with respect to their sale and distribution of green and sustainable investment products. The review focused on the types of green and sustainable investment products offered, the relevant classification framework, the selling process as well as controls andmonitoring conducted by the RIs. From the review, the HKMA observed that green and sustainable investment products offered include funds, bonds and structured products. Some RIs have established policies and procedures governing the product due diligence (PDD) and the classification framework for green and sustainable investment products, and put in place control measures to mitigate potential greenwashing, social washing and impact washing risks. Some good practices have been identified in areas including PDD, customer’s sustainability preference, disclosure, governance and controls, staff training, as well as bookbuilding activities. In formulating the expected standards, the HKMA makes reference to international developments, with evolving standards and practices. The HKMA’s expected standards and examples of good practices are set out in Annex I to the Circular and Frequently Asked Questions in Annex II. The HKMA states that the expected standards outlined in Annex I are applicable to RIs that market or classify investment products as green and sustainable (except those on bookbuilding). The HKMA states that RIs are expected, where applicable, to review and make any necessary enhancements to their policies and procedures, having regard to the expected standards set out in the Circular, so that adequate control measures are in place to manage potential risks arising from the sale and distribution of green and sustainable investment products to customers. The HKMA states that RIs should comply with the expected standards set out in the Circular as soon as practicable and in any case not later than 12months from the date of issuance of this Circular. Link to the Circular here Sustainability Disclosure Requirements (SDR) and Investment Labels On 28 November 2023 the UK’s Financial Conduct Authority (FCA) set out its final and guidance in connection with the new Sustainability Disclosure Requirements (SDR) and Investment Labels regime. The FCA is introducing a package of measures to help consumers navigate the market for sustainable investment products. It is introducing: • An anti-greenwashing rule for all FCA-authorised firms to reinforce that sustainability-related claims must be fair, clear and not misleading. It is also consulting on supporting guidance. • Naming and marketing rules for in-scope investment products, with a view to ensuring the use of sustainability-related terms is accurate. • Four investment labels that can be applied to in-scope products that meet certain qualifying criteria. • Consumer-facing information with the aim of providing consumers with better, more accessible information to help them understand the key sustainability features of a product. • Detailed information targeted at institutional investors and consumers seeking more information in pre-contractual, ongoing product-level, and entity-level disclosures. • Requirements for distributors to ensure that product-level information (including the labels) is made available to consumers.