Study Reviews APAC Investment Funds’ Climate Risks

The Hong Kong Monetary Authority (HKMA) has issued a new research memorandum assessing the exposure of Asia-Pacific (APAC) investment funds to climate-related risks. HKMA analysed funds’ climate risk exposure by using both the historical and forward-looking metrics of companies held in their portfolios. Exposure to climate-related risks were likely to have an impact on wider financial stability risks, the paper noted, adding that this was “increasingly relevant” to investment funds in the APAC region, as they have seen significant growth in their assets under management in recent years. The paper also mentioned that climate risk exposure varied noticeably across economies in the region, and was generally higher for funds domiciled in emerging markets. It flagged that greater data gaps on climate-related financial risks in these economies was a key issue. In addition, the analysis found that funds with high climate risk exposure were likely to face larger outflows if investors perceived an increase in such risks. To help address this, HKMA encouraged investment funds to take sustainability factors into account in their investment approach and decision-making process, and to promote greater public awareness through education and training.

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