Hong Kong’s Securities and Futures Commission (SFC) has introduced voluntary principles to provide guidance on how investors should fulfil their ownership responsibilities when investing in Hong Kong listed companies.

The SFC has published revised principles and responded to a consultation it held last year on its Principles of Responsible Ownership. Investors who choose not to adopt these principles are  encouraged to provide their stakeholders with disclosure which clearly explains why the Principles have not been adopted at the outset and, if applicable, explain what alternative measures they have in place. If an investor does not have a policy on shareholder engagement they cannot be regarded as having adopted the Principles.

The Principles state that investors have ownership responsibilities that go beyond voting and that these include monitoring and engaging on matters such as strategy, performance, risk, capital structure and corporate governance.

Investors, the Principles state, should have clear policies on corporate governance principles and practices and on how they will engage with their investee companies if they have concerns about their investee companies’ corporate governance practices and any departures from Hong Kong’s corporate governance code should be carefully considered. The Principles also state that investors should encourage their investee companies to have policies on environmental, social and governance (ESG) issues and engage with investee companies on significant ESG issues “that have the potential to impact on the companies’ goodwill, reputation and performance”.

The SFC said it will monitor the Principles’ reception and development to determine whether any amendments or the introduction of obligations or requirements may be necessary at a future stage.

Last Updated: 18 March 2016