Securities Commission issues Revised Guidelines on Sustainable and Responsible Investment Funds

22 February 2023

1. The 2023 Guidelines have been re-arranged and now consist of three parts, namely: 

• Part A: Requirements relating to Sustainable and Responsible Investment Fund (‘SRI Fund’);
• Part B: ASEAN Sustainable and Responsible Fund (‘ASEAN SRF’) Standards; and
• Part C: Application to Qualify as an SRI Fund and an ASEAN SRF. 

2. A qualified SRI Fund and a fund seeking to qualify as an SRI Fund may seek to qualify as an ASEAN SRF. The requirements for an application to qualify as an ASEAN SRF are set out in Chapter 6 of the 2023 Guidelines. In essence, the issuer must ensure that the SRI Fund complies with the ASEAN Sustainable and Responsible Fund Standards issued by the ASEAN Capital Markets Forum. 


3. In addition to the six existing fund structures (e.g. unit trust fund and wholesale funds) that may seek to qualify as an SRI Fund, the 2023 Guidelines allow funds under a private retirement scheme to seek qualification as an SRI Fund and as an ASEAN SRF. 


4. Ethical and faith-based investing¹ is now recognised as one of the strategies that an SRI Fund may adopt to achieve its policy. 


5. Part A of the 2023 Guidelines that relate to an SRI Fund comprises the following: 

• Chapter 3: General SRI Fund Requirements;
• Chapter 4: Disclosure and Reporting Requirements of SRI Fund’s investments; and
• Chapter 5: Certification in respect of Tax Exemption for Managing an SRI Fund. 

6. The disclosure and reporting requirements and obligations imposed on an issuer under Chapter 4 of the 2023 Guidelines have been enhanced significantly as compared to the 2021 Guidelines. For example: 

• an SRI Fund that uses an index as a reference benchmark for the purposes of attaining its policies and strategies, is required to provide details of the benchmark, such as its characteristics and general composition, and an explanation of its relevance must be disclosed;
• if an issuer appoints a third-party verifier to verify that the SRI Fund’s investments are aligned with its policies and strategies, and a verification report is made publicly available, the credentials and expertise of the third-party verifier must be included in the report; and
• the disclosures to be made in the annual and interim reports of an SRI Fund have been expanded, with more granular information being required in relation to the achievement of the SRI Fund’s policies and strategies². 

7. The 2023 Guidelines require an SRI Fund to primarily invest in securities which are in accordance with its policies and strategies, with a minimum asset allocation of at least two thirds of its net asset value. Disclosures must be made on how the policies and strategies are being measured and monitored throughout the lifecycle of an SRI Fund and the due diligence carried out to ensure the underlying instrument’s compliance with the SRI Fund’s policies and strategies. An SRI Fund must also disclose its policies and processes where it has breached the minimum asset allocation threshold.