The Hong Kong stock exchange has introduced new environmental, social and governance (ESG) requirements for issuers, from the middle of 2020.
The exchange – part of Hong Kong Exchanges and Clearing (HKEX) – published its requirements following feedback on its original proposals launched in May, with all receiving between 83% and 99% support from respondents.
"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," said HKEX listing head David Graham.
"The changes reflect the Exchange's commitment to enhance Hong Kong's ESG regulatory framework and to meet investor and stakeholder expectations in accordance with international best practices," he added.
Under the new rules, issuers will be compelled to provide a board statement setting out its consideration of ESG issues and explain the boundaries and identification process used for specific entities or operations included in the ESG reports.
In addition, listed firms will be required to disclose "significant" climate-related issues which have, or may, impact the company.
Targets related to 'environmental' key performance indicators (KPIs) will require disclosure, and the disclosure obligation for 'social' KPIs will be upgraded to require the issuer to "comply or explain" why they have not.
After respondents' comments, the deadline for delivering the ESG reports was extended to five months after the financial year end. The original proposals had been for reports to be delivered between three and four months after the financial year end.
The new rules come into force from the start of July 2020.
HKEX said it also undertook a review of 400 randomly selected issuers on their ESG reports. The results of this review were described by Graham as being "in line with the key areas which we seek to improve through the changes set out".
Among the report findings, HKEX said two-thirds of issuers disclosed that a materiality assessment had been completed on ESG issues – but some described the assessment in a more detailed manner than others.
Only a minority described board involvement in the production of ESG report.
