Hong Kong stock exchange introduces ESG reporting guidance for companies

‘Comply or explain’ could be in place by 2015

The Hong Stock Exchange has published a set of recommendations on environmental, social and governance (ESG) reporting that will be appended to its listing rules, effective from the start of 2013.

And it says it is considering making some elements of the guide obligatory, on a comply-or-explain, basis by 2015.

It follows a five-month consultation launched in December 2011; the exchange received 106 submissions from institutional investors, companies, professional bodies and others.

Nine institutional investor respondents representing over US$2.2trn (€1.75trn) of assets under management responded, which the exchange said showed that “institutional investors are keen to see more ESG information from Hong Kong issuers”.
The guidance covers four areas: workplace quality, environmental protection, operating practices and community involvement. Each is sub-divided into: aspects, general disclosure recommendations and key performance indicators.
“The guide will be a recommended practice,” the exchange said. “Subject to further consultation, the Exchange plans to raise the obligation level of some recommended disclosures in the guide to ‘comply or explain’ by 2015.”“We hope the guide will help issuers start reporting and serve as a first step towards adopting international practices,” said Mark Dickens, Head of Listing at the exchange. Companies are being encouraged to follow international guidelines, such as the Global Reporting Initiative and the Carbon Disclosure Project.

“Institutional investors are keen to see more ESG information from Hong Kong”

The exchange will survey companies’ reports for the first time in 2014. The guide is for companies with limited familiarity with ESG issues but which are looking to start to report on ESG.
Some respondents to the consultation, the exchange said, had suggested including information on women on boards. But the exchange is considering this issue “as a separate exercise”.

In separate news, the Shanghai Stock Exchange and its index partner the China Securities Index Co. Ltd. have launched two new environmental benchmarks: the SSE Environmental Protection Industry Index and the CSI Environmental Protection Industry Index.