Rules and Regulations

The 2024 Amendments will come into effect in the following manner:

(a) For financial years commencing on or after 1 January 2025:

• All listed issuers (i.e. both Main Board listed issuers and GEM listed issuers) are required to disclose Scope 1 and Scope 2 GHG emissions on a mandatory basis;

• In addition to Scope 1 and Scope 2 GHG emissions which are required to be reported on a mandatory basis:

- all Main Board listed issuers are required to report on the climate-related disclosure requirements set out in Part D of the ESG Code (Climate Requirements) on a “comply or explain” basis; and

- all GEM listed issuers are encouraged to report on the Climate Requirements on a voluntary basis.

(b) For financial years commencing on or after 1 January 2026, all Hang Seng Composite LargeCap Index constituents are required to report on the Climate Requirements on a mandatory basis.

Listed issuers are required to disclose their ESG governance structure by including a statement from the board containing the following elements in their ESG report:

(i)   A disclosure of the board’s oversight of ESG issues;

(ii)  The board’s ESG management approach and strategy, including the process used to evaluate, prioritise and manage material ESG-related issues (including risks to the issuer’s businesses); and

(iii) How the board reviews progress made against ESG-related goals and targets with an explanation of how they relate to the listed issuer’s businesses.

There is no specific requirement in the ESG Code as to the form or location of the board statement on ESG governance, and listed issuers may decide on the appropriate presentation of such statement, so long as the presentation is clear for readers to understand the board’s governance of ESG issues.

Subject to the implementation timeline for the 2024 Amendments, for ESG reports for financial years commencing on or after 1 January 2025, listed issuers shall disclose additional information about their governance structure, processes, controls and procedures in relation to the management, oversight and monitoring of climate-related risks and opportunities.

In preparing their governance disclosures pursuant to paragraphs 13 (board statement on ESG governance) and 19 (climate-related governance disclosures) of the ESG Code, listed issuers should avoid unnecessary duplication. If oversight of ESG-related (including climate-related) risks and opportunities is managed on an integrated basis, a listed issuer should provide integrated governance disclosures in its ESG report.

“Materiality” is defined in the ESG Code as “the threshold at which ESG issues determined by the board are sufficiently important to investors and other stakeholders that they should be reported”. The definition is sufficiently wide to encompass a range of materiality considerations, including but not limited to financial materiality.

Whether a particular ESG issue is material is a matter of judgment for the board. The board may determine that an ESG issue is material based on different considerations, for example, the facts involved, the circumstances of the listed issuer with reference to the views of its key stakeholders and/or the impact of the ESG issue on the listed issuer’s financial performance or financial position. Listed issuers should bear in mind that materiality can have different meanings for different stakeholder groups, and should disclose the board’s involvement, the identification process and the criteria for the selection of material ESG factors in the ESG report.

For the purpose of making climate-related disclosures under Part D of the ESG Code, listed issuers must disclose information about climate-related risks and opportunities that could reasonably be expected to affect their cash flows, access to finance or cost of capital over the short, medium or long term. To assess the materiality of a climate-related risk or opportunity, listed issuers should consider both quantitative and qualitative factors, and assess the nature or magnitude of the relevant risk or opportunity.

Listed issuers may disclose information that is material to investors (based on financial materiality) as well as information that is material to other stakeholders (based on other materiality considerations) in their ESG report. Where they do so, listed issuers must ensure that the material information for investors is not obscured and is clearly identified and distinguishable from the information provided for other stakeholders.

While listed issuers may set targets for all KPIs that are material to them, Part C of the ESG Code only expressly requires disclosure of emission targets (KPI A.1.5), waste reduction targets (KPI A.1.6), energy use efficiency targets (KPI A.2.3) and water efficiency targets (KPI A.2.4) on a “comply or explain” basis.

The targets may be actual numerical figures or directional, forward-looking statements.

The climate-related targets that listed issuers have set (or are required to meet by law or regulation) and disclosed pursuant to Part D of the ESG Code may or may not be those required under Part C of the ESG Code.

Listed issuers may set climate-related targets beyond those required under Part C of the ESG Code. Where a listed issuer has set climate-related targets, regardless of whether such targets are those required under Part C of the ESG Code or other additional climate-related targets, it should disclose the information set out in paragraphs 37 to 40 of Part D of the ESG Code regarding each climate-related target.