ESG Reporting

The Stock Exchange of Hong Kong Limited (the “HKEX”) has published the Guide for New Listing Applicants (the “Guide”), effective from 1 January 2024, introducing the new chapter on prospectus disclosure requirements and guidance in relation to Corporate Governance and Environmental, Social and Governance (“ESG”) (Chapter4.3 of the Guide). Listing applicants should pay attention to the impact of the Guide on the contents of the prospectus, in order to timely assess and optimize the proposed listing timetable.
 
<a href="../../../../../uploads/HKEX_s_Latest_Prospectus_Disclosure_Requirements_on_Corporate_Governance_and_Environmental_Social_and_Governance_under_the_Guide_for_New_Listing_Applicants_V6_5de8f68b61.pdf" target="_blank" rel="noopener">Read the report now</a>
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HKEX’s Latest Prospectus Disclosure Requirements on Corporate Governance & Environmental, Social and Governance under the Guide for New Listing Applicants 

In recent years, HKEx has increasingly prioritized Environmental, Social, and Governance (ESG) factors. The consultation paper released in April showcases HKEx's commitment to enhancing the quality of ESG disclosures made by listed companies.
 
What strategies should companies adopt to establish a robust ESG governance framework and effectively adapt to future regulatory requirements concerning ESG compliance?
 
Find the answer now
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Pathway for Establishing an Effective ESG Governance System

The initial public offering (“IPO”) journey has never been straightforward. In addition to business-related financial metrics, evolving stakeholder expectations and heightening regulatory demands for resilient growth supported by well-articulated Environmental, Social and Governance (“ESG”) strategy and performance have indicated that ESG and climate-related corporate mandates growingly tip the scales when it comes to a company’s successful IPO and overall performance.
 
Against the backdrop that regulatory authorities and capital markets around the world are demanding transparent ESG disclosures from companies looking to go public, while IPO-ready companies align themselves with enhanced regulatory frameworks, some of them even make ESG practices front and center in their IPO roadshow phase to gain access to the pool of capital from international ESG-focused investors.
 
Click <a href="../../../../../uploads/EN_IPO_Journey_the_Importance_of_ESG_in_IPO_Process_20221107_VP_ET_SL_ET_SL_SJC_b180b1b534.pdf" target="_blank" rel="noopener">here</a> to learn more about the latest ESG disclosure requirements and ESG essential for IPO applicants.
 
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IPO Journey:  The Importance of ESG in IPO Process

Under the new “Comply or Explain” disclosure requirements of the Hong Kong Stock Exchange (HKEx) Environmental, Social and Governance Reporting Guide, issuers are expected to emphasize the company’s roadmap towards sustainable growth through environmental, social and governance (ESG) target-setting. ESG is also being incorporated into the investment strategies of investors throughout the world, demonstrating its growing importance. Setting meaningful ESG performance targets with clear roadmaps can create value in growth and investment for companies.  Click <a href="../../../../../uploads/Creating_Value_through_ESG_Target_Setting_EN_d8bb5b681b.pdf" target="_blank" rel="noopener">here</a> to learn more. <a href="../../../../../uploads/Creating_Value_through_ESG_Target_Setting_EN_d8bb5b681b.pdf" target="_blank" rel="noopener"><img src="../../../../../uploads/Cover_EN_a5636c8bbf.png" alt="" width="300" height="424" /></a>

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Creating Value through ESG Target Setting

The Securities and Futures Commission (“SFC”) issued a circular providing guidance to management companies of SFC-authorized unit trusts and mutual funds on enhanced disclosures for funds that incorporate environmental, social and governance (“ESG”) factors into their key investment focus (“ESG funds”) on 29 June 2021.
 
As a replacement for the previous version released in 2019, the circular includes an additional requirement that ESG funds should conduct and disclose periodic assessments concerning how ESG factors are integrated and provide guidance for climate-oriented ESG funds.
 
According to SFC, the number of ESG funds offered to the public in Hong Kong has more than doubled since 2019. Increasing awareness regarding ESG investing has led to a need for asset managers to clearly explain their ESG focus, helping investors determine if the products meet their investment goals.
 
The circular outlines the requirements for ESG funds to disclose in their offering documents, including a description of the ESG focus and a list of ESG criteria used to measure the fund’s ESG focus, such as filters, indicators, ratings, third party certificates, etc. ESG funds should also disclose their investment strategies, asset allocations, benchmarks and risks associated with their ESG focus. Furthermore, there are new requirements outlined in the updated circular, requiring ESG funds to make periodic assessments and reports on attaining the ESG focus, and specific guidance for ESG funds that focus on climate change.
 
"Making sustainability-related disclosures more transparent, comparable and consistent will help investors identify suitable ESG funds and reduce opportunities for greenwashing," said Mr Ashley Alder, the SFC's Chief Executive Officer. “Hong Kong’s financial market is where global capital connects with Mainland enterprises, so what we do here can have an outsized influence on global developments in green and sustainable finance.”
 
Currently, there are about 60 SFC-authorised funds with an investment focus on climate change, green, ESG or sustainable development in the SFC database on authorised ESG funds. To enhance transparency for these funds, their key features will also be listed in the database after the new circular takes effect on 1 January 2022.
 
As the ESG landscape is still developing rapidly, the SFC will continue to monitor the market developments and may provide further guidance or impose additional requirements for ESG funds, where appropriate.
 
Click <a href="https://apps.sfc.hk/edistributionWeb/api/circular/openFile?lang=EN&amp;refNo=21EC27" target="_blank" rel="noopener">here</a> to read the full circular.
 
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SFC Issues Updated Disclosure Guidance for ESG Funds

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

A growing concern of sustainability has been emerging in the investment community over the past decade. It was an old thought that considering sustainability for society implied sacrificing financial returns of investment. The development of Environmental, Social, Governance (ESG) investing, however, has demonstrated a different story.
 
This publication introduces the engagement of PRI from investor community, various ESG assessments in capital market such as MSCI ESG Ratings, the shift in focus on ESG issues due to the preferences of younger generation’s investors and COVID-19, and also the prevalence of green investment in the global investment community.
 
Please <a href="../../../../../uploads/The_Emergence_of_Sustainability_Agenda_to_Investment_ESG_Investing_a014243ea9.pdf" target="_blank" rel="noopener">click here</a> to read the full publication.
 
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