News & Insights

Hong Kong Stock Exchange puts more emphasis on new applicants’ / listed companies’ disclosures on ESG matters and board gender diversity

On 17 May 2019, The Stock Exchange of Hong Kong Limited (Exchange) published a consultation paper “Review of the Environmental, Social and Governance Reporting Guide and related Listing Rules”, proposing to strengthen the rules on issuers’ governance and disclosure of environmental, social and governance (ESG) activities and metrics. 

 At the same time, to reinforce its focus on ESG matters and board diversity (in particular, gender diversity), the Exchange also published:

  • updated Guidance Letter HKEX-GL86-16 (i) setting out the Exchange’s expected disclosure on ESG matters and (ii) requiring disclosures on board diversity (including gender) in the listing documents of new applicants.


A.        Consultation proposals on ESG reporting

The table below summarises the current requirements and the key proposals in the consultation paper:

Current requirements


(1) Shortening the deadline for publication of ESG reports

The current Listing Rules require an issuer to disclose information set out in the ESG Reporting Guide (Appendix 27 to the Main Board Rules; Appendix 20 to the GEM Rules) in the annual report, in a separate report or on the issuer’s website within three months after publication of the issuer’s annual report.

To amend the relevant Listing Rule such that the deadline for publication of ESG reports will be aligned 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).

(2) Introducing mandatory disclosure requirements

(a) Governance structure

The ESG Reporting Guide states that the board has overall responsibility for the issuer’s ESG strategy and reporting.

To mandate the disclosure of a statement from the board containing:

  • a disclosure of the board’s oversight of ESG issues;

  • the process used to identify, evaluate and manage material ESG-related issues (including risks to the issuer’s businesses); and

  • how the board reviews progress made against ESG-related goals and targets.

The board statement should include information on the issuer’s current ESG management approach, strategy, priorities and goals/targets and an explanation of how they relate to the issuer’s businesses.

 (b) Reporting principles

The ESG Reporting Guide sets out reporting principles (including “materiality” and “quantitative”) that are to underpin the preparation of an ESG report.  But there is no specific requirement mandating issuers to disclose how such reporting principles are applied in the reports.

To mandate the disclosure of an explanation on how the issuer has applied the reporting principles in the preparation of the ESG report:

  • on “materiality”, the issuer must disclose a description of significant stakeholders identified, the process and results of the issuer’s stakeholder engagement (if any), and the criteria for the selection of material ESG factors; and

  • on “quantitative”, the issuer must disclose information on the standards, methodologies, assumptions and/or calculation tools used, and source of the conversion factors used for the reporting of emissions/energy consumption (where applicable).

(c) Reporting boundaries

Currently, an ESG report should state which entities in the issuer’s group and/or which operations have been included in the report, but issuers are not required to disclose the process in which entities or operations are chosen to be excluded from the ESG report.  Investors may potentially misunderstand an issuer’s overall ESG performance where poor-performing entities or operations are excluded from the ESG report without explanation.

To mandate the disclosure of an explanation of the ESG report’s reporting boundary, disclosing the process an issuer used to identify the specific entities or operations that are included in the ESG report.

(3) Requiring disclosure of significant climate-related issues

Currently, issuers are not required to disclose how climate change impacts them.

To introduce a new aspect under subject area “Environmental” (subject to “comply or explain”) requiring disclosure of the significant climate-related issues which have impacted, and those which may impact the issuer, and the actions taken to manage them. 

(4) Revising “Environmental” key performance indicators (KPIs)

Issuers are required to disclose “results achieved” from their initiatives to reduce emissions/waste, but not targets.

Issuers are required to disclose greenhouse gas emissions (GHG) in total and the intensity, but not emissions by scope types.


To require disclosure of a description of targets set regarding emissions, energy use and water efficiency, waste reduction, etc. and steps taken to achieve them. 

To require disclosure of Scope 1* and Scope 2* GHG emissions.

* Scopes of emissions are defined in accordance with the international reporting framework published by the World Resources Institute / World Business Council for Sustainable Development, as reported in The Greenhouse Gas Protocol: A Corporate Accounting and Reporting Standard.

(5) Upgrading the disclosure obligation of “Social” KPIs

Currently, the Social KPIs of the ESG Reporting Guide are recommended disclosures (i.e. voluntary disclosures).

To upgrade the disclosure obligation of Social KPIs to “comply or explain”.


(6) Revising “Social” KPIs

(a) Employment types

Issuers are recommended to disclose total workforce by gender, employment type, age group and geographical region.

To clarify that “employment types” should include “full- and part-time” staff.

(b) Rate of fatalities

Issuers are recommended to disclose the number and rate of work-related fatalities for the reporting year.


To require disclosure of the number and rate of work-related fatalities occurred for each of the past three years including the reporting year.

(c) Supply chain management

Issuers are recommended to describe practices relating to engaging suppliers, number of suppliers where the practices are being implemented and how they are implemented and monitored.

To introduce new KPIs to require disclosure of the issuer’s:

  • practices used to identify environmental and social risks along the supply chain; and

  • practices used to promote environmentally preferable products and services when selecting suppliers,

and how they are implemented and monitored.

(d) Anti-corruption

There is currently no KPI requiring disclosure of anti-corruption training provided to directors and staff.


To introduce a new KPI requiring disclosure of anti-corruption training provided to directors and staff.

 (7) Encouraging independent assurance

The current ESG Reporting Guide provides that the issuer may consider obtaining assurance on its ESG report. However, there is no guidance on the information to be disclosed if assurance is obtained, or the benefits of obtaining assurance.

To state in the ESG Reporting Guide that the issuer may seek independent assurance to strengthen the credibility of ESG information disclosed; and where independent assurance is obtained, the issuer should describe the level, scope and processes adopted for assurance clearly in the ESG report.


The deadline for responding to the consultation is 19 July 2019.

Expected implementation timeline – Subject to responses to the consultation, the Exchange intends to implement the proposals for financial years commencing on or after 1 January 2020, whereupon issuers would need to start gathering the necessary information for the purpose of publishing their ESG reports under the revised ESG Reporting Guide in 2021.


B.       Guidance materials on ESG governance and reporting

FAQs No. 24K and 24L in Series 17 and FAQ No. 2A in Series 18 have been added to clarify how different aspects of ESG relate to the Corporate Governance Code (Appendix 14 to the Main Board Rules; Appendix 15 to the GEM Rules).

The key points are summarised below:

  • Principle C.2 of the Corporate Governance Code requires the board to be responsible for evaluating and determining the nature and extent of the risks it is willing to take in achieving the issuer’s strategic objectives.  This principle refers to all material risks in connection with the issuer’s businesses which should include, amongst others, material ESG risks.
  • For the purpose of Code Provision C.2.2 of the Corporate Governance Code, the Exchange expects the issuer to ensure the adequacy of resources for the issuer’s accounting, internal audit and financial reporting function, as well as those relating to the issuer’s ESG performance and reporting.

  • Issuers should reflect in their ESG reports their governance structure in ESG matters including the board’s role in the oversight of ESG matters and assessing and managing material environmental and social risk issues.

In addition, the Exchange has also launched an e-training course, “ESG Governance and Reporting”, which explains the board’s leadership role in ESG matters.


C.       Additional disclosures in listing documents on ESG matters and board gender diversity

The Exchange has revised Guidance Letter HKEX-GL86-16 to require new applicants to include in their listing documents:

  • more specific ESG disclosures, including material information on applicants’ environmental policies, and details of the process used to identify, evaluate and manage significant ESG risks; and

  • a policy on board diversity (including gender). Where an applicant has a single gender board, it should disclose and explain:

           (a)   how and when gender diversity of the board will be achieved after listing;

           (b)   what measurable objectives it has set for implementing gender diversity (for example, achieving a specific numerical target for the proportion of the absent gender on its board by a certain year); and

           (c)   what measures the applicant has adopted to develop a pipeline of potential successors to the board that could ensure gender diversity of the board. 

Key Contacts

Ronny Chow

Partner | Corporate Finance

Email or call +852 2825 9435

Alexander Que (Alex)

Partner | Corporate Finance

Email or call +852 2825 9770

Rhoda Yung

Partner | Corporate Finance

Email or call +852 2825 9624

Sabrina Fung

Partner | Corporate Finance

Email or call +852 2825 9478

Gary Wong

Partner | Corporate Finance

Email or call +852 2825 9798

Maynard Leung

Partner | Corporate Finance

Email or call +852 2825 9415

Eugina Chan

Consultant | Corporate Finance

Email or call +852 2825 9786

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