Hong Kong exchange strengthens ESG reporting guidance to include emissions, labour practices

Asia’s third largest bourse had strong support for changes

The Hong Kong stock exchange (HKEx) has strengthened its ESG reporting guidance to require companies to disclose more, on a “comply or explain” basis, about a range of ESG factors, including emissions and other environmental-related data, policies on managing environmental and social risks of the supply chain and labour standards, including preventing child and forced labour.

The exchange is Asia’s third largest bourse in terms of market capitalization and the move comes amid talks of a mooted Hong Kong Stewardship Code that would recommend that investors encourage their investee companies to have ESG policies.

The HKEx, which is not a member of the UN-backed Sustainable Stock Exchanges Initiative, decided to strengthen its ESG guidance after consultation on changes met with strong support from respondents.

David Graham, HKEx’s Chief Regulatory Office and Head of Listing, said: “We are encouraged by the overwhelming support for our proposals to strengthen issuers’ ESG disclosure obligations.

“Issuers starting to report on their ESG performance may reap the benefits of better risk management, improved access to capital, greater capacity to meet supply chaindemands and lower operational costs, to name but a few of the advantages that ESG reporting could bring to issuers’ businesses.”

HKEx’s updated ESG guide has new requirements for issuers to disclose ESG information on an annual basis or explain why it isn’t disclosing it.

The guide also outlines what type of information should be disclosed including greenhouse gas emissions and labour practices.

The HKEx says the development of the ESG guide will be an evolutionary process, with the longer term goal of achieving better and more comprehensive ESG reporting amongst its issuers. To facilitate the transition it will provide training for issuers on its updated ESG guide that will come into effect for issuers’ financial years commencing on or after 1 January 2017.

Some 203 respondents engaged with the consultation, including Canada-based financial services firm Manulife Limited, a recent signatory to the PRI, BlackRock, California pension giant CalPERS, Glass Lewis & Co, Legal & General Investment Management, the Local Authority Pension Fund Forum, Norges Bank Investment Management and Greenpeace East Asia. Link