SITCA announced Guidelines for Operational Procedures and Information Disclosure

The Securities Investment Trust and Consulting Association has announced the Practical Guidelines for Operational Procedures of ESG Investment and Risk Management and ESG Information Disclosure (“ESG Guidelines”, 證券投資信託事業證券投資顧問事業環境、社會及治理(ESG)投資與風險管理作業流程暨ESG資訊揭露實務指引) on 30 June 2022 which we summarize below:

1.Scope of Application–The ESG Guidelines apply to the securities investment trust enterprises (SITE) and securities investment consulting enterprises engaging in discretionary investment management accounts (SICE). (Article 2)

2.Guidelines–The ESG Guidelines are provided as guidelines for SITE/SICE to establish relevant internal rules and mechanisms which the SITE/SICE shall review on a regular basis and ensure that the company fully executes the same. (Article 3)

3.Governance–The board of directors and senior management shall ensure that the SITE/SICE takes into account the identified ESG investment and risk management factors in the formulation of the investment policy, risk appetite, strategy and business plan, and continuously supervises the management and disclosure of ESG-related investments and risks. The implementation of the ESG-related investment and risk management shall be reported to the board of directors on a quarterly basis, and an immediate corresponding measure shall be taken in response to any major abnormalities or special circumstances found in accordance with internal rules which shall be submitted to the board of directors. (Article 4)

4.Investment Management–The SITE/SICE shall incorporate ESG factors into the investment management operation process, and take reasonable steps to assess the impact of ESG-related risks on investment assets in accordance with the correlation between the investment policy and the ESG factors, and conduct regular investment reviews. (Article 5)

5.Risk Management–including (i) establishing ESG risk benchmarks and evaluation methods; (ii) establishing management and on-going supervision mechanism for ESG-related risk exposures; and (iii) establishing a reinforced control and management mechanism for investment objects with higher ESG related risks. (Article 6)

6.Information Disclosure–The SITE/SICE shall at least produce a sustainability report once a year or disclose regular evaluation report on the company’s website. (Article 7)

7.Grace Period–The SITE and SICE are required to adjust their practice accordingly in 6 months and 1 year respectively after the implementation of the ESG Guidelines. (Article 8)

Mike Lu/Jeffrey Liu

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