Asean launches Sustainable and Responsible Fund Standards
AWEEK after I wrote about the launching of the Asean Sustainability-linked Bond Standards, the 37th Asean Capital Markets Forum (ACMF) also launched the Asean Sustainable and Responsible Fund Standards (SRFS), in which I participated as the head of delegation for the Securities and Exchange Commission (SEC).
This follows the release of the Roadmap for Asean Sustainable Capital Markets in May 2020, which contains actionable recommendations to provide strategic direction and guide the ACMF and its members in developing action plans and initiatives across the region to drive Asean’s sustainable agenda forward. The SRFS is in line with the roadmap’s recommendation on catalyzing products and enabling access to underserved areas to further expand the sustainable asset class that comprises equity, bonds and funds.
The SRFS aims to provide the minimum disclosure and reporting requirements that can be consistently applied to collective investment schemes (CIS) that seek to qualify, considering the rise of CIS with environmental, social and governance (ESG) investment focus and the need for a comparable, uniform and transparent disclosure of information to mitigate the risk of greenwashing. CIS or CIS operators must demonstrate compliance with the SRFS, which will assist investors in making informed decisions while guiding the CIS or CIS operators on the disclosure of information.
As to scope, the SRFS will apply to any new or existing CIS that seeks to qualify and are permitted to be offered by securities regulators in their respective Asean jurisdictions. Please take note that the Asean SRFS and relevant securities laws, rules and regulations governing CIS in the respective Asean jurisdictions should be read together and complied with.
In the case of an umbrella fund structure, the Asean SRFS only apply to a sub-fund of the umbrella that wishes to be qualified.
The Asean SRFS provides the following key features:
– The name of the Asean SRFS should accurately and proportionately reflect the sustainability features of the CIS without overstating or overemphasizing the sustainability features or being misleading.
– It provides examples of sustainable investment objectives and strategies such as disclosure of the following: selection, retention and realization of its investments and how these will be continuously implemented in the investment process; disclosures made on sustainability principles such as the Sustainable Development Goals, among others; and disclosures made on sustainable investment strategies. The CIS that merely adopts the ESG integration strategy or negative screening to seek financial returns without having a sustainable investment objective does not qualify under the Asean SRFS.
– There are also policies and procedures that include disclosures on the process in place, the objective of which is to ensure compliance with the Asean SRFS throughout its lifecycle.
– The Asean SRFS should primarily invest in securities in accordance with its sustainable investment objectives and strategies, with a minimum asset allocation of at least twothirds of its net asset value, at all times.
– The CIS or CIS operator may appoint a third-party verifier on a voluntary basis to verify that investments are aligned with sustainable investment objectives and strategies. They are also required to publish the annual or interim reporting on the CIS’ sustainable investment objectives and strategies, as well as the review of sustainability considerations of the Asean SRFS’ portfolio, on a designated website.
Being a member state of the ACMF, the SEC continues to promote sustainability initiatives consistent with international best practices to promote greater integration and connectivity of regional capital markets in the Asean region.