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  • Stock Exchange releases conclusions to ESG consultation 联交所刊发“检讨《环境、社会及管治报告指引》及相关《上市规则》条文的咨询总结

20 Feb 2020

Stock Exchange releases conclusions to ESG consultation 联交所刊发“检讨《环境、社会及管治报告指引》及相关《上市规则》条文的咨询总结


The Hong Kong Stock Exchange released its conclusions to its market consultation on proposed changes to the environmental, social and governance reporting guide (the ESG Guide) in Appendix 27 to the Main Board Listing Rules and Appendix 20 to the GEM Listing Rules. The proposed changes largely received positive feedback and will be implemented for issuers’ financial years commencing on or after 1 July 2020 (ie the changes will apply to ESG reports to be issued from July 2021 onwards).

Key changes

  • Timing of publication of ESG Report: An issuer will be required to publish an ESG within five months of its financial year end.
    The Stock Exchange had originally proposed to align the timing of publication of an issuer’s ESG Report with its annual report. The modified timeframe is in recognition that a significant number of issuers in practice do not publish their ESG reports in tandem with their annual reports and to strike a balance between the resources required to publish a meaningful ESG report and the timeliness of such report. Nevertheless, the Stock Exchange has stated that it may revisit this and require simultaneous publication of annual reports and ESG reports.
  • Mandatory disclosure requirements: The level of disclosure will be elevated. Whereas currently there are ‘comply or explain’ and ‘recommended’ disclosures, the changes will require disclosures to be ‘mandatory’ and ‘comply or explain’ so there will no longer be any ‘recommended’ disclosures. Mandatory disclosures include:
    • a board statement setting out the board’s consideration of ESG issues, containing at least (a) a disclosure of the board’s oversight of ESG issues, (b) 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 business), and (c) how the board reviews progress made against ESG-related goals and targets with an explanation of how they relate to the issuer’s business
    • application of relevant reporting principles in ESG reports, namely: (a) materiality (the process to identify and the criteria for the selection of material ESG factors and, if a stakeholder engagement is conducted, a description of the significant stakeholders identified and the process and results of the stakeholder engagement); (b) quantitative (the standards, methodologies, assumptions and/or calculation tools used, and source of conversion factors used for the reporting of emissions/energy consumption); and (c) any changes to the methods of KPIs used or other factors affecting a meaningful comparison
    • explanation of any reporting boundary and the identification process for including specific entities or operations in ESG reports.

    The mandatory disclosures all relate to the board’s approach to ESG-related issues. They will allow investors and other stakeholders to assess an issuer’s commitment to, and effort in, ESG-related matters.

    All other disclosures will be ‘comply or explain’ disclosures. The social KPIs that are currently recommended disclosures will be elevated to ‘comply or explain’. For all items, issuers will have to either make a disclosure or give a meaningful explanation as to why such item is not material to it and the reasons for such an assessment.

  • New aspect on climate change: A new ‘comply or explain’ item will be introduced in relation to climate change – specifically, policies on identifying and mitigating significant climate-change related issues and a description of those climate-change related issues and actions taken to manage those issues.
    新增有关气候变化的层面:有关气候变化所要求的披露责任,与《ESG指引》中的其他层面一样,属于 “不遵守就解释”条文;特别是识别及减缓重大气候变化相关事宜的政策,以及对这些重大气候变化相关事宜的说明,及其应对的行动。
  • Enhanced disclosures on environmental KPIs: The environmental key performance indicators will be revised to require disclosures of targets set regarding emissions, energy use and water efficiency, waste reduction and the steps taken to achieve them.
  • Enhanced disclosures on social KPIs: Social KPIs will be enhanced to require disclosure of additional items such as number of work-related fatalities that occurred in the past three years, practices used to identify environmental and social risks along the supply chain, practices used to promote environmentally preferable products and services when selecting suppliers and description of anti-corruption training provided to directors and staff.

ESG approach generally

The Stock Exchange emphasised that there is no ‘one size fits all’ model for ESG reporting. Depending on the particular industry that an issuer is in, the issuer may consider certain ESG items material while others may not. In this regard, materiality is particularly important and, indeed, is one of the reporting principles underpinning ESG disclosures. As part of its mandatory disclosures, an issuer will need to explain in detail its assessment of materiality.
联交所强调,ESG汇报并没有“划一” 的模式。视乎发行人所处的特定行业,不同发行人对某些ESG事宜的重要与否均可能有不同的判断。对此,“重要性”(汇报原则)就显得尤为关键;事实上,它是支撑ESG披露的报告原则之一。作为“强制披露”的一部分,发行人需要详细解释其对“重要性”的评估。

For “comply or explain” items, certain items may be appropriate for disclosure for some issuers while for others it may be more appropriate to provide an explanation as to why such items are not material. A meaningful explanation as to why such item is not material including the assessment of materiality would suffice for this purpose.





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