Issuers listed on the Stock Exchange of Hong Kong are being encouraged to begin planning and building the infrastructure and systems necessary to meet future climate reporting requirements, as the exchange looks to further enhance climate-related disclosures in line with the Task Force on Climate-related Financial Disclosures (TCFD) framework and the new International Sustainability Standards Board (ISSB) climate standards.
The recommendation was made as part of a review published by the exchange into ESG disclosures, based on requirements instituted in 2020, which focused on board governance and oversight of ESG issues, as well as management of climate-related risks. For the report, the exchange sampled the ESG reports of 400 issuers.
According to the exchange, the review indicated good progress in ensuring that boards are giving necessary focus to ESG considerations. The report found that more than 95% of issuers disclosed their boards’ oversight and management approach on ESG matters, while 85% of issuers chose to disclose details on all new climate-related requirements, which include consideration of significant climate-related risks and mitigation measures, setting of certain environmental targets, and reporting on scope 1 and scope 2 GHG emissions. The report also found that around a third of issuers reviewed have started reporting on Scope 3 emissions, and around 5% have adopted climate-related scenario analysis for climate resilience assessment.
In the report, the exchange stated that it is currently reviewing its ESG framework, “with a focus to enhance climate disclosures amongst our issuers.” Aligning with the TCFD recommendations and ISSB standards would significantly increase reporting requirements above the current exchange rules, with requirements under the frameworks including reporting on climate plans, Scope 3 value chain emissions, and performance of climate scenario analysis.
The exchange said that it would take into account “the market readiness and the challenges issuers face.” The report also noted that the exchange has published a range of guidance and training materials, including guidance on climate disclosures to help issuers prepare TCFD-aligned climate change reporting.
Additional recommendations from the review included ensuring that issuer ESG reports provide information on supply chain risk management and green procurement practices, and that ESG reports and annual reports are published at the same time. The exchange also added that monitoring progress against ESG targets is key to boards’ evaluation of the effectiveness of measures taken, and that disclosure of information on the board’s progress review, and the results of the review, are required under the ESG Rules.
Hong Kong Exchanges and Clearing Limited (HKEX) Head of Listing, Bonnie Y Chan, said:
“Sitting at the heart of Asia’s capital markets, HKEX is well positioned to help drive the broad sustainability agenda across our markets. We are committed to promoting high standards of ESG practice and disclosure amongst our issuer community, through listing regulation, advocacy and education.”