Exchange Publishes Corporate Governance and ESG (Climate Disclosures) Guidance

• Exchange publishes Guidance on Climate Disclosures to facilitate TCFD-aligned reporting
• Exchange also publishes analysis of IPO applicants’ corporate governance and ESG practice
• Exchange will launch new ESG portal, a centralised ESG educational platform

 

The Stock Exchange of Hong Kong Limited (the Exchange), a wholly-owned subsidiary of Hong Kong Exchanges and Clearing Limited (HKEX), today (Friday) published guidance to listed issuers on climate disclosures, as well as an analysis of IPO applicants’ corporate governance and environmental, social and governance (ESG) practice disclosure in 2020/2021.

“As Asia’s largest listed exchange operator and market regulator, we are committed to pioneering and promoting good governance and ESG excellence. The latest guidance on climate disclosures and our analysis on corporate governance and ESG practice disclosure among IPO applicants represent our continuous commitment in assisting our issuers and IPO applicants in their sustainability journeys, and helping them implement changes that make a real impact,” said Bonnie Y Chan, HKEX’s Head of Listing.

Guidance on Climate Disclosures

The Exchange’s ESG reporting requirements have incorporated certain key recommendations of the Task Force on Climate-Related Financial Disclosures (TCFD). Meanwhile, Hong Kong’s Green and Sustainable Finance Cross-Agency Steering Group has announced plans for mandatory TCFD-aligned climate-related disclosures by 2025¹.

The Guidance on Climate Disclosures (Guide) will help companies assess their response to risks arising from climate change. The Guide provides practical tips and step-by-step guidance to assist issuers in preparing TCFD-aligned climate change reporting.

The Exchange will review its ESG reporting framework to further align with TCFD recommendations, and will collaborate with other regulators to work on a roadmap to evaluate and potentially adopt the new standard(s) to be developed by the International Sustainability Standards Board under the International Financial Reporting Standards Foundation. The Exchange will issue further guidance in due course.

Analysis of IPO applicants’ corporate governance and ESG practice disclosure in 2020/2021 (Review)

Separately, the Exchange published the Review that focuses on IPO applicants’ practices on corporate governance, diversity and ESG. The Exchange evaluated the prospectuses of new applicants seeking a primary listing on the Exchange between July 2020 and June 2021, and further tracked the diversity progress of newly-listed issuers² by reviewing their corporate governance reports.

Key findings and recommendations of the Review include:

• Compliance culture – IPO applicants should instil strong corporate culture that fully adopts and prioritises compliance and governance measures of integrity, and embed the compliance culture into their everyday workflows.
• Board diversity – Board gender diversity of new applicants has improved significantly, with the percentage of single gender board applicants dropping from 30 per cent in 2019 to 21 per cent in 2020, and down further to 12 per cent in the first half of 2021. IPO applicants are expected to not have single gender boards and should prioritise on achieving board gender diversity.
• ESG matters – Most applicants made disclosures on environmental and social issues at IPO. Nonetheless, IPO applicants should conduct a thorough analysis and assessment to identify material ESG risks, and consider making appropriate disclosure on climate-related issues and initiatives to reduce carbon emissions, to facilitate the transition to a low-carbon economy³. ESG risk management starts before listing, and it is important for IPO applicants to plan ahead to implement the necessary measures to ensure future compliance.

More details of the findings and recommendations are in the report entitled “Analysis of IPO Applicants’ Corporate Governance and ESG Practice Disclosure in 2020/2021” available on the HKEX website.

ESG Academy

As the global markets leader in the Asian time zone, HKEX is pleased to announce that a new centralised ESG educational platform, ESG Academy, will be launched to guide issuers and the broader business community in their sustainability journeys.

The ESG Academy serves as a compass for stakeholders to gain clear understanding on the evolving ESG requirements. Issuers may also access the Exchange’s guidance materials to explore the trends that define the future of ESG and to develop a roadmap to integrate ESG considerations into their business strategies.

For more information, please visit the ESG Academy.

 

Notes:

1. In December 2020, the Green and Sustainable Finance Cross-Agency Steering Group announced that TCFD-aligned climate-related disclosures will be mandatory across relevant sectors no later than 2025. The Steering Group indicated its support towards adopting the standard to be developed by the International Sustainability Standards Board in July 2021, and further expressed its support for the Hong Kong’s Climate Action Plan 2050 (see Note 3) in October 2021.
2. Single gender board issuers listed between July 2019 and December 2020.
3. This is in line with Hong Kong’s Climate Action Plan 2050 that sets out the vision of "Zero-carbon Emissions - Liveable City - Sustainable Development" and outlines the strategies and targets for combating climate change and achieving carbon neutrality. For details, visit the Climate Ready website or see paragraphs 96 to 98 in the Chief Executive’s Policy Address 2021.

 

 

About HKEX

Hong Kong Exchanges and Clearing Limited (HKEX) is one of the world’s major exchange groups, and operates a range of equity, commodity, fixed income and currency markets.  HKEX is the world’s leading IPO market and as Hong Kong’s only securities and derivatives exchange and sole operator of its clearing houses, it is uniquely placed to offer regional and international investors access to Asia’s most vibrant markets.

HKEX is also the global leader in metals trading, through its wholly owned subsidiaries, The London Metal Exchange (LME) and LME Clear Limited.  This commodity franchise was further enhanced with the launch of Qianhai Mercantile Exchange (QME), in China, in 2018.

HKEX launched the pioneering Shanghai-Hong Kong Stock Connect programme in 2014, further expanded with the launch of Shenzhen Connect in 2016, and the launch of Bond Connect in 2017.

www.hkexgroup.com

 

 

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