Hong Kong

At present, Hong Kong does not have any legislations or regulations which specifically target greenwashing.  There are however certain regulatory requirements for certain entities (such as listed companies and licensed corporations) who are subject to regulatory oversight by certain regulators in Hong Kong. These entities may be subject to enforcement actions by these regulators for making misleading claims or misrepresentations on their ESG credentials, claims and reports. These regulators include the Hong Kong Stock Exchange (HKEX), the Securities and Futures Commission (SFC), and the Hong Kong Monetary Authority (HKMA).

Under the HKEX’s ESG Reporting Code, issuers are required to publish an ESG report on an annual basis, which covers the Board’s oversight of ESG issues, management approach and strategy to ESG-related issues, and how the Board reviews progress on ESG-related goals and targets with an explanation of how they relate to the issuer’s businesses. If its ESG report does not comply with disclosure requirements, the issuer should explain its reasons for non-compliance.  A key focus is on climate-related disclosures on governance and strategy, in particular, disclosure of climate-related risks and opportunities, and explanation of how these currently or are anticipated to affect the issuer’s financial position, business model and value chain.

The SFC has also published various circulars, FAQs and code of conduct for asset managers on ESG compliance.  SFC-authorised funds which incorporate ESG factors (ie ESG funds) are subject to enhanced disclosure requirements, including in the offering documents and regular disclosures on how they have achieved their ESG goals, failing which the funds will be removed from SFC’s authorized list. These include disclosure of the proportion of investments that are commensurate with the fund’s ESG focus, description of the due diligence carried out on the ESG-related attributes of the fund’s underlying assets, and description of the sources and processing of ESG data. The fund’s name and marketing materials should also be accurate and not misleading, and should proportionately reflect and not overstate ESG features.

Finally, Hong Kong’s Companies Ordinance contains a general requirement for directors to prepare a report each financial year, which includes, amongst others, a review of the company’s environmental policies and performance, pursuant to what is prescribed under that Ordinance.

 

Enforcement actions

There are currently no specific legislations or regulations on greenwashing enforcement in Hong Kong. However, regulators may take enforcement actions against companies, such as listed companies, SFC-licensed funds and financial institutions, for making statements, reports, advertisements and marketing materials for financial products that are false or misleading.

The Securities and Futures Ordinance (SFO) contains various provisions that impose civil and/or criminal liability for making false or misleading statements, for example:

• Disclosure of false or misleading information that induces the subscription, sale or purchase of securities or dealings in futures contracts, or to maintain, increase, reduce or stabilize the price of the same, may attract civil and/or criminal liability¹.
• Providing materially false or misleading information to the SFC and HKEX, in purported compliance with disclosure requirements, may constitute a criminal offence, with a maximum penalty of HKD1 million (approx. USD128,000) fine and 2 years imprisonment².
• Communicating false or misleading information to the public concerning securities or futures contracts or that may affect price of securities and futures, may attract civil liability to pay damages to another person who sustains loss in reliance of false or misleading communications³.

Under section 213 of the SFO, the SFC has the power to bring an action in the Hong Kong Courts on behalf of the investing public, which essentially serves as a derivative action, as there is no formal mechanism for class action in Hong Kong. Previously, the SFC has brought successful claims under section 213 of the SFO against companies for market misconduct, such as in the landmark case of Securities and Futures Commission v Tiger Asia Management LLC & Others [2013] 16 HKCFAR 324. This can be a potential avenue for the SFC to take enforcement action against companies for greenwashing claims.

 

Potential mitigation of greenwashing risks

From 1 January 2025, the HKEX’s Climate Disclosure Rules took effect in respect of listed companies in Hong Kong, under a phased schedule. The Rules are based on International Financial Reporting Standards (IFRS S2). Scope 1 and Scope 2 provide for mandatory disclosures for all issuers on greenhouse gas emissions for financial years commencing from 1 January 2025. Scope 3 (other disclosures) applies to Hang Seng Composite LargeCap Index constituents from 1 January 2025 on a ‘comply or explain’ basis, with mandatory disclosure in financial years commencing from 1 January 2026. For other Main Board issuers, Scope 3 will apply on a ‘comply or explain’ basis.

In its bulletin on mitigating greenwashing risks published in August 2024, HKMA recommended companies to use regulatory technology (RegTech) solutions, which employ artificial intelligence (AI) to ensure the accuracy of climate-related data and generate ESG reports in compliance with requirements, to avoid making false or misleading statements.

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¹Sections 277 and 298.
²Section 384.
³Section 391.