The Stock Exchange of Hong Kong Limited (the Exchange), a wholly-owned subsidiary of Hong Kong Exchanges and Clearing Limited (HKEX), last week published the findings of its latest review of issuers’ environmental, social and governance (ESG) disclosures (Report). The review1 focused on the requirements that came into effect in July 2020 (2020 Enhancements) as set out in the Exchange’s ESG Reporting Guide (ESG Rules).
“Sitting at the heart of Asia’s capital markets, HKEX is well positioned to help drive the broad sustainability agenda across our markets. We are committed to promoting high standards of ESG practice and disclosure amongst our issuer community, through listing regulation, advocacy and education. We are pleased to note that the 2020 Enhancements have helped drive positive change in the market, and we hope that the recommendations and guidance set out in the Report will lead to enhanced ESG stewardship in the months and years ahead,” said Bonnie Y Chan, HKEX Head of Listing.
The 2020 Enhancements’ emphasis is on boards’ ESG governance and management of climate-related risks. Regarding ESG governance, over 95 per cent of issuers disclosed their boards’ oversight and management approach on ESG matters. On climate change, 85 per cent of issuers acknowledged the importance of climate-related risks and chose to disclose details on all new climate-related requirements3. These findings show that good progress has been made in ensuring that boards of Hong Kong listed companies are giving the necessary focus to ESG considerations and that the Listing Rules are achieving the intended effects. This fully supports with HKEX’s goal of aligning with the TCFD4 framework and the new climate disclosure standards of the International Sustainability Standards Board.
Key recommendations of the review include:
Board governance of ESG issues – Monitoring the progress against ESG targets is key to the board’s evaluation of the effectiveness of the measures taken. Disclosure of information on the board’s progress review, and the results of the review, are required under the ESG Rules.
Climate change – Issuers are encouraged to commence the planning and building of the necessary infrastructure and systems for enhanced climate reporting requirements in the future.
Social issues – Supply chains play an important role to operating a “sustainable business”. Issuers should include in their ESG reports information on supply chain risk management and green procurement practices.
Reporting practices – ESG reports covering financial years commencing on or after 1 January 2022 should be published at the same time as annual reports. Issuers who are yet to align the publication of their ESG reports with annual reports should pay particular attention to the new deadlines5.
For more details, please see the Report entitled “2022 Analysis of ESG Practice Disclosure” available on the HKEX website.
