News & Insights

Tougher ESG reporting requirements to take effect from July 2020

On 18 December 2019, The Stock Exchange of Hong Kong Limited (Exchange) published conclusions to its consultation on the “Review of the Environmental, Social and Governance (ESG) Reporting Guide and Related Listing Rules”.

The Exchange noted clear market support for its proposed amendments and decided to implement them with certain modifications taking into account comments received.  

The changes will be effective for financial years commencing on or after 1 July 2020.

The table below summarises the current requirements and the key changes:

Current requirements

Key changes

(1) Shortening the deadline for publication of ESG reports

The current Listing Rules require an issuer to publish an ESG Report no later than three months after publication of the issuer’s annual report.


To shorten the deadline for publication of ESG reports to a revised timeframe of within five months after the financial year-end. 

Note:   The Exchange encourages issuers to publish ESG reports at the same time as the publication of annual reports, and has indicated that it would consider aligning the publication timeframe of ESG reports and annual reports in the future.

The Listing Rules and the ESG Reporting Guide will also clarify that issuers are not required to provide printed form of the ESG report to shareholders except for responding to specific requests, but are required to notify shareholders about the publication of the ESG report on the Exchange’s and the issuer’s website.

(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. But there is no requirement to disclose details of the board’s involvement in the ESG reporting process and governance structure.

According to the Exchange’s report published on 18 December 2019 entitled “Analysis of Environmental, Social and Governance Practice Disclosure In 2018” (2018 Review Report), the Exchange observed that ESG reports from a majority of the sample listed issuers contained little or no description of board involvement.

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

  • disclosure of the board’s oversight of ESG issues;
  • the board’s ESG management approach and strategy, including the process used to evaluate, prioritise 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 with an explanation of how they relate to the issuer’s businesses.

(b) Reporting principles

The ESG Reporting Guide sets out reporting principles (including “materiality”, “quantitative”, “consistency” and “balance”) that are to underpin the preparation of an ESG report.  But there is no requirement 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:

  • materiality: The issuer should disclose: (i) the process to identify and the criteria for the selection of material ESG factors; (ii) if a stakeholder engagement is conducted, a description of significant stakeholders identified, and the process and results of the issuer’s stakeholder engagement.
  • quantitative: The issuer should disclose information on the standards, methodologies, assumptions and/or calculation tools used, and source of conversion factors used, for the reporting of emissions/energy consumption (where applicable).
  • consistency: The issuer should disclose any changes to the methods or key performance indicators (KPIs) used, or any other relevant factors affecting a meaningful comparison.

(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 boundaries, 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 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 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, among other things, “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.



Some of the new requirements, in particular, advancing the deadline for publication of ESG reports and the new mandatory disclosure requirements, may involve substantial adjustments to an issuer’s ESG infrastructure and compliance process. The new aspect on climate change and the new KPIs on supply chain may require issuers to collect the relevant data for the first time.  Issuers are encouraged to familiarise themselves with the new requirements and start the process as early as possible to allow fine-tuning of the infrastructure for ESG reporting under the new requirements.  The Exchange will launch a new set of director e-training on ESG reporting and will also update other resources on ESG reporting on the dedicated webpage on its website.

Issuers are also encouraged to take into account the Exchange’s recommendations set out in the 2018 Review Report.  In particular, the Exchange noted that one or more of the “comply or explain” provisions were not addressed in some of the ESG reports reviewed by it, and it reminded issuers that this is technically a breach of the Listing Rules.  If a provision was immaterial, the issuer is required to say so.  The Exchange also noted in its review that only 3% of the “comply or explain” provisions were “explained”.  The high percentage of reports adopting the “comply” option may suggest that issuers have not properly determined what is material to them, or that the “explain” option is believed to be a less preferred option.  Issuers are reminded that if a “comply or explain” provision is immaterial to them, then an explanation to that effect may well be appropriate – “explanation” is not a less preferred or secondary option.

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

Canny Lau

Partner | Corporate Finance

Email or call +852 2826 5346

Eugina Chan

Consultant | Corporate Finance

Email or call +852 2825 9786

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