The Stock Exchange of Hong Kong Limited (the Exchange), a wholly-owned subsidiary of Hong Kong Exchanges and Clearing Limited (HKEX), today (Friday) 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)2.
“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.
Notes:
- In the review, the Exchange analyzed 400 issuers’ ESG reports for the financial year ended 30 June 2021, 31 December 2021 and 31 March 2022.
- Appendix 27 of Main Board Listing Rules / Appendix 20 of GEM Listing Rules.
- These include consideration of significant climate-related risks and mitigation measures; setting of certain environmental targets; and reporting on scope 1 and scope 2 GHG emissions.
- The Task Force on Climate-Related Financial Disclosures.
- Around 60 per cent of issuers have already aligned publication of their ESG reports and annual reports.
About HKEX
Hong Kong Exchanges and Clearing Limited (HKEX) is a publicly-traded company (HKEX Stock Code:388) and one of the world’s leading global exchange groups, offering a range of equity, derivative, commodity, fixed income and other financial markets, products and services, including the London Metal Exchange.
As a superconnector and gateway between East and West, HKEX facilitates the two-way flow of capital, ideas and dialogue between China and the rest of world, through its pioneering Connect schemes, increasingly diversified product ecosystem and its deep, liquid and international markets.
HKEX is a purpose-led organisation which, across its business and through the work of HKEX Foundation, seeks to connect, promote and progress it markets and the communities they support for the prosperity of all.
www.hkexgroup.com