New HKEx ESG reporting requirements


In December 2015, Hong Kong Exchanges and Clearing Limited (HKEx) confirmed the implementation of changes to its Economic, Social and Governance Reporting Guide (ESG Guide) proposed earlier in the year. This means that all companies listed on the Hong Kong Stock Exchange will now be required to disclose information about their ESG management and performance annually, either as a standalone report or within their annual report.

The key change from previous guidance is that the disclosure of policies and KPIs relating to a number of key topics – or ‘aspects’ – has been upgraded from voluntary to ‘comply or explain’. This means companies must provide the specified information on each topic, or provide a reasonable explanation of why it is not relevant to their company (or, where possible, use an alternative indicator and explain why that is more suitable).

Policies on the following aspects are covered by the ‘comply or explain’ requirement:
Environmental

Social

  • B1 – Employment
  • B2 – Health and safety
  • B3 – Development and training
  • B4 – Labour standards
  • B5 – Supply chain management
  • B6 – Product responsibility
  • B7 – Anti-corruption
  • B8 – Community investment


For a number of the above, companies are also required to disclose their compliance record, i.e. any instances of falling to comply with applicable laws and regulations. Required disclosures on corporate governance are covered in Appendix 14 of the HKEx Main Board Rules (Appendix 15 for Growth Enterprise Market listed companies).

Specific KPIs are set out for each of the aspects, e.g. A1.1 – Types and respective volume of emissions, A1.2 – Total GHG emissions and intensity, etc. Disclosure of the KPIs will remain voluntary in the first year; for the financial year 2017, all environmental disclosures will be upgraded to ‘comply or explain’ status, while the social indicators will remain voluntary.

The new rules require board involvement in overseeing ESG reporting and strategy. For listed companies that have not yet appointed a senior lead for ESG/sustainability management, now is the time to do so. For those that have, the new guidance provides an excellent opportunity to begin a board-level conversation about what your ESG priorities and programmes should be.

Hong Kong already has many providers offering ESG/sustainability reporting services. These range from mainstream consultancies including EY, KPMG and PwC to specialists such as CSR Asia and the Business Environment Council.

Please contact Sustainable Business HK or any of the above to understand more about what the new requirements mean for you.

www.sustainablebusiness.org.hk