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Exchange Seeks Views on Strengthening ESG Rules and Publishes Guidance Materials on ESG and Gender Diversity

Regulatory
17 May 2019

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:

 

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.

Frequently Asked Questions: FAQs No. 24K and 24L in Series 17 and FAQ No. 2A in Series 18 have been added to clarify how different aspects of ESG relate to the Corporate Governance Code.

Gender Diversity

In respect of disclosure in listing documents by new applicants, the Exchange has revised Guidance Letter HKEX-GL86-16 to require additional disclosure on policy of board diversity (including gender) and how gender diversity of the board can be achieved in the case of a single gender board.  The revised Guidance Letter also sets out our expected disclosure on ESG matters, including material information on applicants’ environmental policies, and details of the process used to identify, evaluate and manage significant ESG risks.

“Board diversity promotes effective decision-making and enhances corporate governance. The consideration of diversity is becoming an increasingly important factor when investors make their investment decisions. Promotion of board diversity is a key focus of the Exchange and an area we are committed to continuing to develop,” said Mr Graham.

 

Ends

Updated 06 Sep 2019

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