Exchange Publishes Consultation Paper on Proposed Changes to its ESG Guide

Exchange Publishes Consultation Paper on Proposed Changes to its ESG Guide

The Stock Exchange of Hong Kong Limited (the Exchange), a wholly-owned subsidiary of Hong Kong Exchanges and Clearing Limited (HKEx), published a consultation paper today (Friday) to seek views on proposed amendments to its Environmental, Social and Governance (ESG) Reporting Guide (the ESG Guide or Guide) (Note 1).

The proposals aim to strengthen ESG disclosure requirements, encourage more widespread and standardised ESG reporting amongst issuers, and help issuers meet greater demand and expectations for non-financial information from investors and other stakeholders.  In formulating the proposals, the Exchange took into consideration developments in both Hong Kong and international markets.

"When we first introduced the Guide it was intended to be the first step in an evolutionary process, with the longer term goal of achieving better and more comprehensive ESG reporting amongst our issuers," said David Graha*m, HKEx's Chief Regulatory Officer and Head of Listing.  "We believe that strengthening issuers’ ESG disclosure obligations will enhance the quality, sustainability and reputation of our market."

The key proposals in the consultation paper are summarised below:

• Amend the Listing Rules to require issuers to state in their annual report or ESG report whether they have complied with the "comply or explain" (Note 2) provisions of the ESG Guide for the relevant financial year. 
   
• Revise the introductory section of the Guide to provide more guidance on reporting and to be more in line with international standards.
   
• Re-arrange the Guide into two subject areas ("Environmental" and "Social").
   
• Upgrade the general disclosure under each of the aspects of the Guide to "comply or explain" and align the wording with the directors' report requirements under the Companies Ordinance (Cap 622) (incorporated in Appendix 16 to the Main Board Listing Rules).
   
• Upgrade the key performance indicators under the "Environmental" subject area to "comply or explain".
   
• Revise the wording of the recommended disclosure to bring it more in line with international standards by incorporating disclosure of gender diversity.

The consultation paper and questionnaire can be downloaded from the HKEx website.  Interested parties are encouraged to respond to the consultation paper by submitting the questionnaire. The deadline for responses is 18 September 2015. 

Notes: 

1. The ESG Guide is set out in Appendix 27 to the Main Board Listing Rules (Appendix 20 to the GEM Listing Rules). 

2. Where an issuer deviates from "comply or explain" provisions, it must give considered reasons.