CONSULTATION ON THE REVIEW OF THE ENVIRONMENTAL, SOCIAL AND GOVERNANCE REPORTING GUIDE AND RELATED LISTING RULES

The Stock Exchange of Hong Kong Limited (“SEHK”) issued a consultation paper in May on the “Review of The Environmental, Social and Governance Reporting Guide and Related Listing Rules”.

The SEHK in 2013 introduced the Environmental, Social and Governance Reporting Guide (the “Guide”) as a voluntary guide. Following a market consultation in 2015, the Listing Rules were amended to mandate issuers to report on Environmental, Social and Governance (“ESG”) matters on an annual basis and for the same period covered in their annual reports.

In November 2018, the SEHK updated its “How to prepare an ESG report?” and Frequently Asked Questions (“FAQ”) on its ESG-related Listing Rules, taking into account the recommendations raised by the Taskforce on Climate-related Financial Disclosures and with an emphasis on the issuer’s governance structure for ESG issues.

The latest review under this Consultation Paper is a continuation of the SEHK’s approach stated in its 2015 ESG consultation conclusions, i.e. “the development of the ESG Guide has been, and will continue to be, an evolutionary process, with the longer term goal of achieving better and more comprehensive ESG reporting amongst our issuers.”

The key proposals in the consultation include:

(i) shortening the deadline for publication of ESG reports to align with the publication timeframe of the annual report (i.e. within four months (Main Board issuers) or three months (GEM issuers) after the year-end date).

(ii) introducing mandatory disclosure requirements in the ESG Reporting Guide to include:

• a board statement setting out the board’s consideration of ESG issues; and

• application of relevant reporting principles and boundaries in the ESG report;

(iii) requiring disclosure of significant climate-related issues which have impacted and may impact the issuer;

(iv) amending the “Environmental” key performance indicators (KPIs) to require disclosure of relevant targets; and

(v) upgrading the disclosure obligation of “Social” KPIs to “comply or explain”.

The above consultation was considered by Council with the assistance of the Company Law Committee. The Law Society, in general, welcomes SEHK’s proposals in the Consultation Paper.

The full submissions on the above can be found on the Law Society’s website:

http://www.hklawsoc.org.hk/pub_e/news/submissions/20190702.pdf

Jurisdictions: