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The Hong Kong Stock Exchange publishes analysis of corporate ESG disclosure practices

On 25 November 2022, the Stock Exchange of Hong Kong Limited (the Exchange) published its 2022 Analysis of ESG Practice Disclosure (the 2022 Report) where the ESG reports of 400 Hong Kong listed companies with financial year ended 30 June 2021, 31 December 2021 and 31 March 2022 were analysed. As an overarching comment, the Exchange noted a significant increase in boards’ governance over ESG matters as compared with the previous 2018 review and made a number of recommendations to listed companies in Hong Kong.

To recap, companies listed on the Main Board and the Growth Enterprise Market (GEM) are required to comply with their respective listing rules. The Main Board Listing Rules and the GEM Listing Rules each include an ESG Reporting Guide (being Appendix 27 of the Main Board Listing Rules and Appendix 20 of GEM Listing Rules) (the ESG Rules). Listed companies are required to make disclosures in ESG reports which can form part of the company’s annual report or should be published at the same time as the annual report. The additional disclosure requirements introduced in July 2020 focused on board governance and oversight of ESG issues, as well as consideration and mitigation of significant climate change risks. The ESG Rules requires two levels of disclosure obligations - mandatory disclosure and “comply or explain” provisions.

The Exchange encourages listed companies to adopt recommendations by the Taskforce on Climate-related Financial Disclosures (TCFD) when disclosing climate change-related information under the ESG Rules and, in November 2021, the Exchange published Guidance on Climate Disclosures as practical guidance for listed companies to comply with the TCFD disclosure recommendations. In addition, the Exchange also, among others, published an analysis of IPO applicants' corporate governance and ESG practice disclosure in 2020/2021, launched the ESG Academy and published conclusions on Review of Corporate Governance Code which covered ESG topics.

The 2022 Report sets out the findings of the Exchange’s review of listed companies’ compliance with the ESG Rules and make recommendations which sets the pathway to more enhanced ESG reporting practices.

Board governance of ESG issues

On board governance of ESG issues, the 2022 Report made the following three recommendations:


, listed companies should state the board’s responsibility for governance of ESG matters but, in addition, also disclose information that enables readers to understand the relevant processes, controls and procedures used to monitor and manage ESG matters, for example, information on:

  • relevant expertise or skills of the board, or the designated committee or management-level positions, for effective oversight on ESG matters;
  • interaction between the board and the designated committee or the management-level positions, including the frequency and form of reporting to the board;
  • frequency of the board’s discussion on ESG issues;
  • internal and external resources and expertise available for the ESG management process; and
  • alignment of ESG governance with an issuer’s business strategy.


, monitoring the progress against ESG-related goals and targets is key to the board’s evaluation of the effectiveness of the measures taken against particular ESG risks. The additional information may include measurements against industry benchmarks; the process for data collection and verification; and comparison with the historical data (and how the baseline is selected).


, listed companies should provide information on the results of the review, especially for targets or goals set for different timeframes. Where targets are not achieved, issuers should disclose the reasons, and the board’s discussion or assessment on what can be done to achieve the targets or whether any adjustments should be made to the targets. Where the progress is satisfactory, issuers may include further information on whether the trend can be maintained or will be affected in the future (if so, why and what can be done).

The 2022 Report reminds listed companies that disclosure of information on the board’s progress review, and the results of the review, are required under the ESG Rules.

Climate change

The Green and Sustainable Finance Cross-Agency Steering Group (which is made up of the main financial regulatory bodies in Hong Kong) has stated that climate-related disclosures aligned with the TCFD will be mandatory across certain sectors by no later than 2025.

The Exchange has indicated that it is reviewing its ESG Rules with a focus on enhancing climate-related disclosures to further align Hong Kong’s regulatory requirements with the TCFD recommendations and reflect the development by the International Sustainability Standard Board (the ISSB) of its new climate standards. For further information on the ISSB see here and here. The ISSB standards, once finalised, will be voluntary and it will be up to national regulators to decide to adopt the ISSB standards into their national frameworks or incorporate “local characteristics”.

The Green and Sustainable Finance Cross-Agency Steering Group has expressed its support for adopting the ISSB standards (see here) and both the SFC and the Exchange are examining the “readiness” and challenges of issuers to report under the proposed ISSB reporting standards as there is a recognition by the regulators that listed companies are at different stages of their sustainability journeys and there is the challenges faced by issuers around data collection and availability of technical knowledge and expertise to report on certain items (see here).

The 2022 Report urges listed companies to get familiar with the climate-related disclosure requirements under the ISSB climate standards and identify gaps in internal policies and practices in order to prepare for new reporting requirements ahead.

The ESG Rules already require issuers to:

  • consider significant climate-related issues which have impacted, or may impact, the issuers and how issuers mitigate such issues;
  • develop targets and plans in respect of reduction of emission and waste and improving efficiency in energy and water use; and
  • disclose scope 1 and scope 2 greenhouse gas (GHG) emissions.

The ISSB climate standards contemplate disclosures of scope 3 GHG emissions (being the indirect emissions outside of scope 2 emissions that occur in the value chain of the company) and climate-related scenario analysis, which are currently not required under the ESG Rules.

With this in mind, the 2022 Report also makes the following recommendations:

  • on environmental targets, to the extent it is feasible to set quantitative targets, companies should set numerical targets as they are widely requested by climate reporting frameworks, financiers and investors for evaluating the company’s management of climate risks and estimating the financial impacts of relevant climate risks. Where quantitative reporting is adopted, issuers should not omit information on the standards, calculation methodologies, assumptions or conversion factors used for the relevant reporting.
  • given that reporting on scope 3 GHG emission is contemplated under the new ISSB climate standards, issuers should start considering reporting on scope 3 GHG emissions as soon as practicable.
  • on climate-related scenario analysis, a company’s analysis of the resilience of its strategy to climate change can be conducted using different methods, and climate-related scenario analysis is one of the established tools that is recommended by climate reporting frameworks. Issuers are recommended to adopt these tools.

Social issues 

Issuers are already required to disclose against social KPIs on a “comply or explain” basis and against KPIs in respect of supply chain management (being practices to identify environmental and social risks along the supply chain, and practices to promote environmentally preferable products and services when selecting suppliers); and, separately regarding anti-corruption training provided to directors and staff.

The 2022 Report emphasises the important role supply chains play in operating a “sustainable business” and reiterates that issuers should include in their ESG reports information on supply chain risk management and green procurement practices.

The 2022 Report recommends that listed companies consider including the following in their ESG reports:

  • personnel or team that are responsible for managing supply chain sustainability and their duties;
  • process for identifying significant environmental and social risks along the supply chain, and how to assess the impact of such risks on the issuer’s business operations;
  • actions taken or to be taken to mitigate or address the environmental and social risks along the supply chain;
  • criteria for selection of suppliers, and how such factors promote green procurement; and
  • measures for monitoring supply chain risks and green procurement practices.

Issuers should also include information on the scope and method of anti-corruption training, the audience as well as the frequency of the training provided.

Reporting practices

As mentioned above, 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 deadlines.

2025 is on the horizon – listed companies who have not already done so, will be turning their focus to this additional layer of compliance requirements. In our ESG Summer School 2022 podcast series we explore a number of different climate change and sustainability disclosure frameworks across the globe, including a podcast where our London colleagues discuss some of the key lessons learnt from the first set of TCFD disclosures made by UK listed companies in 2022.


asia, climate change and environment, non-financial corp reporting, disclosure & reporting, hong kong sar, blog posts