There should be a governance structure in ESG matters including the board’s role in the oversight of ESG matters and assessing and managing material environmental and social risks issues. 

For ESG reports for financial years commencing on or after 1 July 2020, issuers are required to disclose their ESG governance by including a statement from the board containing the following elements: 

1. A disclosure of the board’s oversight of ESG issues;
2. The board’s ESG management approach and strategy, including the process used to evaluate, prioritise and manage material ESG-related issues (including risks to the issuer’s businesses); and
3. How the board reviews progress made against ESG-related goals and targets with an explanation of how they relate to the issuer’s businesses.

Issuers may decide on the presentation of the statement (e.g. a standalone statement or having the relevant information disclosed across various sections of the ESG report), so long as it is abundantly clear for readers to understand the board’s governance of ESG issues.

“Materiality” is defined in the Guide as “the threshold at which ESG issues determined by the board are sufficiently important to investors and other stakeholders that they should be reported”. 

Whether a particular ESG issue is material is a matter of judgment that depends on the facts involved, the circumstances of the specific issuer with reference to the views of its key stakeholders. The issuer’s board is responsible for evaluating and determining the issuer’s ESG-related risks and opportunities in the context of its business strategy. Priorisation of the risks and opportunities that have been determined by the board may be achieved through conducting a materiality assessment exercise. Issuers should bear in mind that materiality can have different meanings for different stakeholder groups, and should disclose the board’s involvement, the identification process and the criteria for the selection of material ESG factors in the ESG report.

Issuers may also refer to the Exchange’s “How to prepare an ESG Report” and/or the following resources on how to determine materiality:

• The Business Environment Council’s “BEC Handbook: Understanding Materiality for Environmental, Social and Governance Reporting”; and
• The Materiality Finder and Materiality Map® developed by the Sustainability Accounting Standards Board.

The description of, or explanation on, the application of the materiality principle should focus on the identification process and selection criteria of material ESG factors. Stakeholder engagement only serves as one of the tools enabling an issuer to understand the reasonable expectations and interests of stakeholders, as well as their information needs. Since stakeholder engagement should be part of an issuer’s everyday operations, it is not necessary to conduct a stakeholder engagement specifically for the purpose of preparing an ESG report; thus the absence of a specific stakeholder engagement need not be disclosed in the ESG report.

Issuers are also reminded that a stakeholder engagement may take many different forms and does not necessarily mean a large-scale exercise. For example, it may be conducted through daily contact with clients/ suppliers/ employees or the inclusion of a question in the online product warranty registration form.

However, if a stakeholder engagement was conducted, issuers should disclose a description of significant stakeholder identified as well as the process and results of the stakeholder engagement.

No. While issuers may set targets for all KPIs that are material to them, the Guide only expressly requires disclosure of targets for KPIs A1.5, A1.6, A2.3 and A2.4 on a “comply or explain” basis. The quantitative reporting principle also clarifies that targets may be actual numerical figures or directional, forward-looking statements.