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The Introduction of ESG Reporting Guide

Written by: Mr. Daniel Chan - Risk Consultant

Listed issuers are now spending great effort to prepare the Environmental, Social and Governance (“ESG”) reports in order to fulfill the new requirement under the ESG Reporting Guide. Mr. David Graham, the Chief Regulatory Officer and Head of Listing of the Hong Kong Exchanges and Clearing Limited (“HKEX”), has recently expressed some opinions on this topic.

 

Reasons for ESG Reporting
The Stock Exchange of Hong Kong Limited (“the Exchange”) has a statutory duty to ensure that there is sufficient information circulated in the market. Although financial information is important, it is considered not comprehensive if non-financial information is not available. Some surveys also suggested that there is a gap between information expected by investors and the actual information provided by the listed issuers. Thus, the Exchange would like to reduce such gap through the introduction of ESG reporting. The Exchange also believes that this can enhance the corporate governance practice especially in understanding and responding to the ESG-related risks.

Moreover, government in many overseas jurisdictions such as the US and Australia, has placed more emphasis on ESG reporting. To align with the international practice, the Exchange also continuously reviews and develops its own ESG framework.

 

Benefits for listed issuers
Despite the additional cost involved in ESG reporting, it benefits the listed issuers in a number of ways:

It helps the listed issuers to identify the ESG-related risks and assists them to manage the risks properly.

  • The ESG information gathered can assist the management to better understand the long-term strategic issues and help them to make business decisions accordingly.
  • It promotes positive corporate image of the listed issuers through showing their ESG awareness in social media. It also helps to retain and attract competent personnel.
  • It saves cost by addressing the consumption of resources such as water and energy.
  • It reinforces business opportunities in environmental-friendly products and eco-marketing.
  • It enhances the transparency of the listed issuers by disclosing non-financial information and relevant ESG performance.

 

Benefits for investors
With the introduction of ESG reporting, the transparency of the listed issuers is improved. The investors can then review the management style and the issuers’ responses over ESG-related risk areas. In addition, the investors can assess the long-term prospects of the listed issuers through a comprehensive understanding of the ESG areas as well as the general financial information.


Development of ESG Reporting
The Exchange recognizes the importance to adopt ESG practices in daily operations in the long run. According to the ESG Consultation Conclusions in 2015, the Exchange will continuously amend and update the ESG reporting guide in reference to the international best practices. It is expected to have more disclosure in the future and the listed issuers should keep themselves updated with the latest development of ESG reporting.


Source:
What ESG Reporting Brings To The Table

Consultation Conclusions - Review of the Environmental, Social and Governance Reporting Guide

 

If there are any aspects which we may assist, please do not hesitate to contact:

Managing Partner - Mr. Roy Lo
roy.lo@shinewing.hk (Tel. 3583 8048) or

Senior Risk Manager - Ms. Gloria So
gloria.so@shinewing.hk (Tel. 3583 8517)

 

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