HKEX Consultation Paper on ‘Review of Corporate Governance Code and Related Listing Rules’

The Stock Exchange of Hong Kong Limited (the "HKEX") published a consultation paper outlining proposed enhancements to the Corporate Governance Code and Corporate Governance Report (the "Code"), as well as related amendments to the Listing Rules on 16 April 2021. The proposals include new measures aimed at further enhancing corporate governance standards among listed issuers in Hong Kong, specifically in the areas of corporate culture, director independence, diversity, and in Environmental, Social and Governance (ESG) disclosures and standards. Governance and oversight of ESG matters and management of material ESG risks is an integral part of good corporate governance. Therefore, the HKEX is revising the Code to elaborate the linkage between corporate governance and ESG.


Key proposals include:


  1. Corporate culture

    1. Align company’s culture with its purpose, values and strategy; and

    2. Require issuers to have anti-corruption and whistleblowing policies.
      + New Code Provisions, subject to a “comply or explain” basis

  2. Board independence, refreshment and succession planning

    1. Require issuers to have a policy to ensure independent views are available to the board, and annual review of its effectiveness;
      + New Code Provisions

    2. Require independent shareholders’ approval for re-election of an independent non-executive director (INED) serving more than nine years (Long Serving INED) and additional disclosure;
      o Revised Provisions

    3. If all INEDs on the board are Long Serving INEDs, require appointment of a new INED at the forthcoming AGM, and disclose the length of tenure of the Long Serving INEDs on a named basis; and
      + New Code Provisions

    4. Mandatory Nomination committee, chaired by an INED and comprising a majority of INEDs.
      Upgraded to a Listing Rule

  3. Diversity

    1. Single gender board is not considered to be a diverse board;

    2. Mandatory numerical targets and timelines for achieving gender diversity at both board level and across the workforce; and
      + New Mandatory Disclosure Requirement under the Code

    3. Requirements for boards to review progress of diversity policy annually. After the revised Rules take effect, existing issuers with single gender boards will be allowed a three-year transition period to appoint at least one director of the absent gender on their boards. IPO applicants are not expected to have single gender boards.
      + New Code Provisions

  4. Communication with shareholders

    1. Mandatory disclosure on shareholders communication policy, and annual review of its effectiveness.
      Upgraded to Mandatory Disclosure Requirement

  5. ESG

    1. Require issuers to elaborate the linkage in the Code by: (i) setting out the relationship between CG and ESG in the introductory section in the Code; and (ii) including ESG risks in the context of risk management under the Code; and

    2. Revise the Rule and the ESG Guide to require publication of ESG reports at the same time as publication of annual reports. If this proposal is adopted, this will be effective for issuers’ financial years commencing on or after 1 January 2022.

The HKEX's new ESG reporting requirements (effective from July 2020) have incorporated certain important elements of the Task Force on Climate-related Financial Disclosures (TCFD) Recommendations. In late 2020, the Hong Kong Government announced its aim to achieve carbon neutrality by 2050, and the Green and Sustainable Finance Cross-Agency Steering Group announced the initiative towards mandatory TCFD-aligned climate-related disclosures by 2025.  The HKEX encourages issuers to adopt the TCFD Recommendations when disclosing climate change-related information under the ESG Guide and will provide further guidance in this regard.


The deadline for responding to the Consultation Paper is 18 June 2021. Click here to read the full consultation paper.


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Date: 26 Apr 2021 | Tags: ESG Reporting, Corporate Governance

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