ISDA Published Hong Kong Regulatory Analysis for Sustainability-linked Derivatives
In December 2021, ISDA explored regulatory issues for SLDs in the UK, EU and US in its whitepaper entitled Regulatory Considerations for Sustainability-linked Derivatives1. In September 2022, ISDA published the Hong Kong regulatory analysis2 to supplement the December 2021 whitepaper.
With interest in environmental, social and governance (ESG) issues growing in Asia-Pacific, sustainability-linked derivatives (SLDs) have emerged as one of the tools available to help firms meet their ESG objectives. The Hong Kong whitepaper explores how SLDs may be categorised under the Securities and Futures Ordinance (Cap. 571) in Hong Kong, the primary piece of legislation in Hong Kong for OTC derivatives, and other regulatory requirements (such as licensing) which may apply to this type of instruments. The whitepaper also explores whether SLDs may be considered hedging instruments; this will have an impact on how parties exchange regulatory margin, especially with significant non-financial counterparties. It is hoped that the Hong Kong whitepaper will provide market participants with information to develop their own assessments on the regulatory treatment when trading SLDs.
Linklaters is pleased to have advised ISDA on the Hong Kong whitepaper. If you have any questions, please feel free to reach out to our team.
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