Climate Disclosure

 

1. Introduction

This document is produced by CNCB (Hong Kong) Capital Limited (hereby referred as “CNCB Capital”, the “Firm”, or “We”) in relation to new requirements introduced by the Securities and Futures Commission (“SFC”) of Hong Kong in 2021 under its Fund Manager Code of Conduct and the Circular to licensed corporations on the management and disclosure of climate-related risks by fund managers. As a Type 9 license holder regulated under the SFC, we fall within the remit of the regulation’s baseline requirements.

The regulation is applicable to the funds managed by CNCB Capital.

In line with the SFC requirements, the following sections lay out how we will manage climate risk through renewed governance responsibilities and incorporation of climate-related considerations in investment management and risk management.

 

2. Governance

2.1 Governance structure

CNCB Capital’s overarching governance structure is as follows:

 

2.2 Board oversight

The Director Board of CNCB Capital maintains oversight on the Firm’s climate risk approach and strategy. The Director Board consists of directors of both the Firm and its parent company CNCB (Hong Kong) Investment Limited and meets at least once a year to ensure oversight and accountability on all climate-related matters.

 

2.3 Management responsibilities

The Director Board of CNCB Capital authorises the Investment Committee (IC) to exert overall management control and hold ultimate responsibility over climate risk management. The IC consists of senior management representing the investment and risk management functions. It is responsible for ensuring climate-related considerations are incorporated in the following core duties:

• Advise on fund management policies, strategies, and investment guidelines
•  Recommend the appointment of investment managers and advisers, whilst monitoring their performances including compliance with the Firm’s investment guidelines
•  Advise on investment risk management and asset allocation, whilst monitoring investment performance

Through annual discussions, the IC will monitor the Firm’s performance on climate risk management. Day-to-day management of climate risk will be conducted by the Responsible Officers (ROs) overseeing the investment management, compliance, and risk management functions respectively. The following table depicts climate-related responsibilities of each department.

Department	Climate responsibilities
Investment	Incorporate climate risk considerations into the investment process, from investment targeting and pre-screening to diligence and portfolio monitoring Identify and analyse climate risk factors that may impact investment outcomes Facilitate the integration of climate risk factors into the IC’s investment decision making process
Risk Management	Consider and integrate climate risk factors into risk management framework Annual climate risk assessment and reporting on existing portfolio and positions
Legal and Compliance	Ensure compliance with and reporting based on regulatory requirements on climate risk disclosure

 

3. Investment Management and Risk Management

3.1 Relevance and materiality of climate-related risk

CNCB Capital’s portfolio includes but is not limited to public equity, fixed income, private equity, and fund of funds investments. We regard climate-related risk relevant to our investment strategy and portfolio. The follow steps are taken to assess the materiality of climate-related risk to our investment portfolio:

• Categorising the underlying assets of the funds by industry and geography
• Using data from publicly available data sources to identify sectors and locations which are more likely to be adversely affected by transition and physical risks
• Obtaining portfolio-level overview of risk materiality

 

The climate data used is as follows:

Type of climate risk	Investment data type	Public data source
Transition	Industry classification	UNEP FI transition risk heatmap
Physical	Geographic location	Think!Hazard physical hazard tool

 

The climate risk materiality assessment produces inherent risk analysis showing what is the potential level of climate risk exposure associated with a certain industry and location. Once such assessment turns a potentially material result, we will take steps to evaluate climate risk exposure and management at investment level as part of our investment and risk management processes.

 

3.2 Incorporation of climate risk in investment management and risk management

The investment team takes responsibility for factoring climate risk considerations into investment analysis. Relevant tools and guidance have been developed and provided to members of the team to ensure climate considerations are considered into investment management process from pre-investment screening and due diligence to post-investment monitoring.

• In pre-investment screening and due diligence, the materiality assessment approach as outlined in the section 3.1 as well as climate checklists on a target’s climate risk management approach are used to evaluate a target’s climate risk exposure.
• Findings from screening and due diligence are incorporated in project proposals and due diligence reports, and subsequently reviewed by the Investment Committee during the formation of securities pools for each investment portfolio in order to guide investment decision making.
• After investment is made, the investment team will track investees’ climate-related performance during post-investment monitoring. This will be done by tracking any changes to the climate checklists as well as leveraging climate data available on platforms like Bloomberg.

 

At CNCB Capital, we recognise climate risk as a factor that could affect existing risk categories such as credit risk and market risk. As such, we ensure relevant considerations are considered within the Firm’s risk monitoring management processes. The risk management team will perform climate risk materiality assessment at portfolio level to identify potential changes to the Firm’s climate risk exposure. Results and findings are reported annually to the IC to help monitor and manage climate-related risks.