Hong Kong Stock Exchange publishes updated ESG, corporate governance guidance

The Stock Exchange of Hong Kong (HKEX) has published guidance on climate disclosures as well as an analysis of corporate governance and ESG practice disclosure across 2020-2021.

According to HKEX, its ESG reporting requirements have incorporated specific recommendations of the Task Force on Climate-Related Financial Disclosures (TCFD). Alongside this, Hong Kong’s Green and Sustainable Finance Cross-Agency Steering Group has revealed plans for mandatory TCFD-aligned climate-related disclosures by 2025.

The guidance of climate disclosures will seek to help companies assess their response to risk arising from climate change and will offer tips and step-by-step guidance to assist issuers in preparing TCFD-aligned climate change reporting.

In addition, the HKEX intends to review its ESG reporting framework to further align with TCFD recommendations and will team with other regulators to work on a roadmap to evaluate and potentially adopt new standards to be developed by the International Financial Reporting Standards Foundation.

The HKEX also published the review that focuses on IPO applicants’ practices on corporate governance, diversity and ESG. Key findings of the review were that IPO applicants should instil corporate culture that fully adopts and prioritises compliance and governance measures of integrity as well as embed compliance culture into their everyday workflows.

The review also found that board gender diversity of new applicants had improved significantly over the past two years, with the percentage of single gender board applicants falling from 30% to 21% between 2019 and 2020, and down further to 12% in the first half of this year.

Furthermore, most applicants made disclosures on environmental and social issues at IPO, but the review underlined that IPO applicants should conduct an analysis and assessment to identify material ESG risks and consider making appropriate disclosure on climate-related issues and initiatives to reduce carbon emissions.

HKEX head of listing Bonnie Chan said, “As Asia’s largest listed exchange operator and market regulator, we are committed to pioneering and promoting good governance and ESG excellence. The latest guidance on climate disclosures and our analysis on corporate governance and ESG practice disclosure among IPO applicants represent our continuous commitment in assisting our issuers and IPO applicants in their sustainability journeys, and helping them implement changes that make a real impact.”

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