For Hong Kong’s Mandatory Provident Fund (MPF) market to meaningfully adopt ESG considerations, there needs to be a much greater number of fund options and a focused education programme, say industry players.

As reported by AsianInvestor, Hong Kong’s Mandatory Provident Fund Schemes Authority (MPFA) has designed a new set of sustainability principles to bring MPF schemes into line with global practice on climate and other issues.

MPF trustees must then make submissions to the authority by February 2022 explaining where they fall short of the guidelines.

Independently, trustees have undertaken initiatives which serve to benefit MPF members, according to Francis Chung, director of MPF Ratings.

Climate governance

“A number of trustees have taken initiatives on climate governance, but in some cases have been stifled by outside factors," he told AsianInvestor.

AsianInvestor understands that HSBC, as trustee of HSBC's SuperTrust Plus MPF scheme, took proactive steps to demonstrate their ESG credentials, including an attempt to become a signatory of the UNPRI, back in 2019. HSBC has been contacted for comment but had not replied at press time.

“Other schemes have considered launching ESG-related MPF constituent funds but found the fund approval process too burdensome,” said Chung.

More positively, a number of schemes now offer members fee incentives to support local socially responsible initiatives.  

According to the MPFA’s new rules, MPF trustees should have a governance framework to monitor management of ESG risks by investment managers; formulate an ESG integration strategy at the MPF scheme level; consider ESG factors in the investment and risk management processes of MPF funds and disclose their ESG integration strategies and report on implementation progress regularly, including the metrics and targets adopted.

Work in progress

Sun Life is one of the local MPF providers that has been proactive in the ESG space. Pre-dating the proposed ESG framework, Sun Life launched Hong Kong’s first ESG equity fund.

Thomas Fong, associate director, wealth and pensions at Sun Life, welcomes and supports MPFA’s initiative of sustainable investing. But he says it is too early to expect much change in the near future.

“The development of sustainable investing or ESG funds at the MPF system is still in the early stage," Fong told AsianInvestor. "With MPFA’s new sustainability principles on MPF investment, MPF providers may need more time to design their own ESG fund options which can meet the requirements of the principles.

“Having said that, ESG is already being incorporated in most, if not all, MPF providers and investment managers’ processes in designing and managing MPF funds.”

Before that can translate into adoption by MPF scheme members, there will need to be more education on ESG and climate investing options, he added.

“From our understanding, there are still no explicit ‘ESG fund’ options available in the MPF market. In addition, the public’s awareness of ESG and climate investing remains low. Therefore, both MPFA and MPF providers need to provide more education to scheme members.”