2020 ESG GUIDE CONSULTATION CONCLUSIONS

The Stock Exchange of Hong Kong Limited (the Exchange), a wholly-owned subsidiary of Hong Kong Exchanges and Clearing Limited (HKEX), today (Wednesday) published conclusions to its consultation on the ‘Review of the Environmental, Social and Governance (ESG) Reporting Guide (ESG Guide) and Related Listing Rules’ (ESG Consultation Conclusions)1; and the findings of its latest review of listed issuers’ ESG disclosures (ESG Disclosure Review).

“We had a very broad and strongly supportive response to this consultation, and we are pleased to be announcing significant improvements to the ESG governance and disclosure framework for Hong Kong-listed companies.  The changes reflect the Exchange’s commitment to enhancing Hong Kong’s ESG regulatory framework and to meeting investor and stakeholder expectations in accordance with international best practices.  We would like to thank all those who made submissions to the consultation,” said David Graham, HKEX’s Head of Listing.

ESG Consultation Conclusions

The Exchange received 153 responses from a broad range of respondents.  The feedback indicated strong support for the consultation proposals to enhance the ESG reporting framework.  The Exchange will implement the consultation proposals, with modifications, reflecting comments received.  The changes will be effective for financial years commencing on or after 1 July 2020.

Key changes to the ESG Guide and related Listing Rules include:

Introducing mandatory disclosure requirements to include:
a board statement setting out the board’s consideration of ESG matters;
application of Reporting Principles “materiality”, “quantitative” and “consistency”; and
explanation of reporting boundaries of ESG reports;
Requiring disclosure of significant climate-related issues which have impacted and may impact the issuer;
Amending the “Environmental” key performance indicators (KPIs) to require disclosure of relevant targets;
Upgrading the disclosure obligation of all “Social” KPIs to “comply or explain”; and
Shortening the deadline for publication of ESG reports to within five months after the financial year-end.

More information: https://www.hkex.com.hk/News/News-Release/2019/191218news?sc_lang=en

NEW REGULATION IS COMING: EXCHANGE SEEKS VIEWS ON STRENGTHENING ESG RULES AND PUBLISHES GUIDANCE MATERIALS ON ESG AND GENDER DIVERSITY

NEW REGULATION IS COMING: EXCHANGE SEEKS VIEWS ON STRENGTHENING ESG RULES AND PUBLISHES GUIDANCE MATERIALS ON ESG AND GENDER DIVERSITY

The Stock Exchange of Hong Kong Limited (the Exchange), a wholly-owned subsidiary of Hong Kong Exchanges and Clearing Limited (HKEX), today (Friday) announces the publication of:

• Consultation Paper “Review of the Environmental, Social and Governance Reporting Guide and related Listing Rules” (ESG Consultation)
     
• ESG guidance materials (including e-training and Frequently Asked Questions Series 17 and 18); and
  
• Updated Guidance Letter HKEX-GL86-16 (i) setting out our expected disclosure on ESG matters and (ii) requiring disclosures on gender diversity in the listing documents of new applicants.

ESG Consultation

The key focus of the Exchange’s latest ESG Consultation is to support and improve issuers’ governance and disclosure of ESG activities and metrics.

“Our proposals emphasise the board’s leadership role and accountability in ESG and the governance structure for ESG matters. The consultation also seeks to highlight that materiality in respect of ESG is key to meaningful and concise reporting. Our proposal to require disclosure on climate-related issues echoes the increasing international focus on climate change and its impact on businesses,” said David Graham, HKEX’s Head of Listing.  

This consultation reflects the Exchange’s commitment to enhance ESG reporting and disclosure by listed companies, and builds upon its ongoing ESG-related efforts since the launch of the ESG Reporting Guide in 2013.

Key proposals:

• Introducing mandatory disclosure requirements in the ESG Reporting Guide to include:
  • a board statement setting out the board’s consideration of ESG issues; and
  • applications of relevant reporting principles and boundaries in the ESG report;
       
• Requiring disclosure of significant climate-related issues which have impacted and may impact the issuer;
  
• Amending the “Environmental” key performance indicators (KPIs) to require disclosure of relevant targets;
    
• Upgrading the disclosure obligation of “Social” KPIs to “comply or explain”; and
   
• Shortening the deadline for publication of ESG reports to align with the publication timeframe of the annual report (ie within four months (Main Board issuers) or three months (GEM issuers) after the year-end date).

The deadline for responding to the ESG Consultation is 19 July 2019.

Interested parties are encouraged to respond to the ESG Consultation by completing and submitting the questionnaire.

ESG Guidance Materials

E-training: To reinforce the focus of the ESG Consultation, the Exchange has launched an e-training course, “ESG Governance and Reporting”, which explains the board’s leadership role in ESG matters and covers the following six topics:

• What is ESG, and why is it important
    
• Board’s role in ESG governance
    
• Why report on ESG
    
• Essential elements in an ESG report 
• Details on ESG reporting 
• ESG disclosure by IPO applicants

The e-training takes approximately 45 minutes to complete.

More Information from HKEX

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 review of listed issuers' Environmental, Social and Governance (ESG) reports.

EXCHANGE REVIEWS LISTED ISSUERS’ IMPLEMENTATION OF ESG REPORTING GUIDE
Regulatory
18 May 2018
First review of its kind by Exchange
Disclosures by 400 randomly selected issuers examined
Overall level of compliance with ESG Guide high; quality of reporting varied


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 review of listed issuers' Environmental, Social and Governance (ESG) reports.

The review involved analysing the disclosures made by 400 randomly selected issuers with financial year-end dates of 31 December 2016, 31 March 2017 and 30 June 2017 (Sample Issuers).

Overall the level of compliance with the ESG Guide was high although the quality of reporting varied.  At one end of the spectrum there was some excellent reporting, both in terms of detail and clarity, while at the other end, there were some ESG reports that appeared to show that a “box-ticking” approach had been adopted.

Source: https://www.hkex.com.hk/News/News-Release/2018/180518news?sc_lang=en

Hong Kong companies are stepping up on ESG reporting

Hong Kong-listed companies are seeing the benefits of corporate sustainability with the majority of these firms reporting on environmental, social and governance activities.

Source: https://esg.theasset.com/ESG/34816/hong-kong-companies-are-stepping-up-on-esg-reporting

How to prepare an ESG Report?

 The types of emissions
and respective emissions
data.
Note: Air emissions
include NOx, SOx, and
other pollutants
regulated under national
laws and regulations.

This KPI is concerned with air pollution in the locality of the issuer’s operations.
In Hong Kong and the Pearl River Delta, key air pollutants are: nitrogen oxides (“NOX”), sulphur oxides (“SOX”) and respiratory suspended
particles (“RSP”, also known as Particulate Matter (“PM”)). These pollutants tend to be generated by motor vehicles, marine vessels, power
plants, and industrial and commercial processes locally. NOX and SOX emissions are also generated from cement, construction and textiles
industries.
What to report
 Emissions data from gaseous fuel consumption; and
 Emissions data from vehicles.
How to report
Emissions Data from Gaseous Fuel Consumption
(1) Data collection:
Units of fuel consumed (1 unit of gas consumed is equal to 48 megajoules (“MJ”) for Towngas or 46 MJ for liquefied petroleum gas
(“LPG”)).
(2) Calculation:
For Towngas:
Formulas: NOX emissions (kg) = units of fuel consumed x 48MJ x Emission Factor
SOX emissions (kg) = units of fuel consumed x 48MJ x Emission Factor
For LPG:
Formulas: NOx emissions (kg) = units of fuel consumed x 46MJ x Emission Factor
SOx emissions (kg) = units of fuel consumed x 46MJ x Emission Factor
NOX Emission Factors by fuel type
Fuel type Emission Factor Unit of Emission Factor
Towngas 4.02 kg / million MJ of gas
LPG 4.02 kg / million MJ of gas
SOx Emission Factors by fuel type
Fuel type Emission Factor Unit of Emission Factor
Towngas 0.02 kg / million MJ of gas
LPG 0.02 kg / million MJ of gas
Gaseous fuel consumption is not a significant source of PM emissions.
Note on Emission Factors: The Emission Factors above are based on “The Clean Air Charter - A Business Guidebook” published by the
Hong Kong General Chamber of Commerce and the Hong Kong Business Coalition on the Environment
(http://www.cleanair.hk/eng/guidebook/guidebook_eng_r.pdf) and data from the Towngas Sustainability Report 2014
(http://www.towngas.com/sustainabilityRpt/2014/index-en.html).

Source: https://www.hkex.com.hk/-/media/HKEX-Market/Listing/Rules-and-Guidance/Other-Resources/Listed-Issuers/Environmental-Social-and-Governance/How-to-Prepare-an-ESG-Report/app2_kpis.pdf?la=en