Hong Kong – Listed Company’s ESG Reporting Obligation Will Be Upgraded After 1 July 2020.

Rule 13.91 requires an issuer to disclose information set out in the ESG Guide 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.

Rule 13.91(5)(d) is amended to encourage issuers to publish the ESG report at the same time as the publication of the annual report. In any event, the issuer should publish the ESG report as close as possible to and no later than five months after the end of the financial year.

No clear guidance on whether issuers are required to send printed form of the ESG reports to shareholders.

Rule 13.91(5) is amended to clarify that irrespective of whether a shareholder has elected to receive the issuer's corporate communication electronically or otherwise, where the ESG report does not form a part of an issuer's annual report, the issuer is not required to provide a printed form of the ESG report to shareholders unless responding to their specific requests. Issuers are required to notify shareholders that the ESG report has been published on SEHK's and the issuer's websites.

Governance structure – Paragraphs 8-10 of the ESG Guide states that the board has overall responsibility for

Board statement – New Paragraph 13 of the ESG Guide is introduced to

the issuer’s ESG strategy and reporting, including evaluating and determining the issuer’s ESG related risks. In addition to the requirements of the ESG Guide, issuers are required under the Hong Kong Companies Ordinance to include, in their Directors’ Reports, a discussion of their environmental policies and performance including environmental laws and regulations that have a significant impact on them.

require a statement from the board containing the following elements :

1. (a)  a disclosure of the board’s oversight of ESG issues;
2. (b)  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
3. (c)  how the board reviews progress made against ESG-related goals and targets with an explanation of how they relate to the issuer's businesses.

Reporting principles – The ESG Guide sets out reporting principles (including materiality and quantitative) that are said to underpin the preparation of an ESG report, informing the content of the report and how information is presented.

New Paragraph 14 of the ESG Guide is introduced to require a description of, or an explanation on, the application of the following Reporting Principles in the preparation of the ESG report :

Materiality – The ESG report 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 – 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) should be disclosed.

Consistency – The issuer should disclose in the ESG report any changes to the methods or key performance indicators (KPIs) used, or any other relevant factors affecting a meaningful comparison.

Reporting boundary – Paragraph 10 of the ESG Guide provides that an ESG report should state which entities in the issuer's group and/or which operations have been included in the report.

New Paragraph 15 of the ESG Guide is introduced to require a narrative explanation of the reporting boundaries of the ESG report and a description of the process used to identify which entities or operations are included in the ESG report. If there s a change in the scope, the issuer should explain the difference and reason for the change s a change in the scope, the issuer should explain the difference and reason for the change.

Climate change – No requirement to disclose how climate change impacts issuers.

A new Aspect A4 is introduced, which consists of :

(a) General disclosure – policies on measures to identify and mitigate the significant climate-related issues which have impacted, and those which may impact the issuer; and

(b) a KPI – requiring a description of the significant climate-related issues which have impacted, and those which may impact the issuer, and the actions taken to manage them.

SEHK reiterates that the disclosure obligation under the new Aspect on climate change, like all other Aspects in the ESG Guide, is on a "comply or explain" basis. Accordingly, if an issuer considers that climate change is not material to its business and operations, an explanation of that fact in the ESG report will suffice .

Targets – ESG Guide requires issuers to disclose "results achieved" from their initiatives to reduce emissions/waste, but not targets.

The environmental KPIs are revised to require disclosure of:

1. (a)  a description on targets set regarding emissions, energy use and water efficiency, waste reduction, etc. and steps taken to achieve them; and
2. (b)  Scope 1 and Scope 2 greenhouse gas emissions.

SEHK reminds issuers that all Environmental KPIs are subject to "comply or explain" provisions. Issuers are only required to disclose and set targets for Environmental KPIs that are considered material to them.

Emissions – ESG Guide requires issuers to disclose greenhouse gas emissions in total and the intensity. Listing Rules do not require disclosure of emissions by scope types but FAQs encourage issuers to report on emission by scope.

The Social KPIs of the ESG Guide are recommended disclosures (i.e. voluntary disclosures).

Upgrade the disclosure obligation of all Social KPIs to “comply or explain”.

If any of the Social KPIs is considered immaterial to an issuer's businesses, the issuer should explain rather than making irrelevant disclosures.

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

Amend KPI B1.1 to clarify that "employment types" should include "full- and part-time" staff. "Full- and part-time staff" are non-exhaustive examples of employment types.

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

Amend KPI B2.1 to require disclosure of the number and rate of work-related fatalities occurred in each of the past three years including the reporting year.

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.

Introduce new KPIs B5.1 – B5.4 to require disclosure of a description of practices used to :

1. (a)  Identify the environmental and social risks along the supply chain, and how they are managed and monitored; and
2. (b)  Promote environmentally preferable products and services when selecting suppliers, and how these practices are implemented and monitored.

Issuers should consider how far down the supply chain the disclosure should encompass in light of materiality and appropriateness in their own circumstances. In some cases, disclosure of issuers' direct suppliers may be sufficient.

Anti-corruption – Issuers are recommended to disclose the following KPIs:

(a) Number of concluded legal cases regarding corrupt practices brought against the issuer or its employees during the reporting period and the outcomes of the cases.

(b) Description of preventive measures and whistle-blowing procedures, how they are implemented and monitored.

Introduce a new KPI B7.3 to require a description of anti-corruption training provided to directors and staff.

The ESG Guide only sets out the minimum parameters for ESG reporting. SEHK encourages issuers to disclose additional information they consider appropriate and material under this KPI, such as the number of directors or staff trained, the content and the outcomes of the anti-corruption training.

Paragraph 7 of the ESG Guide provides that the issuer may consider obtaining assurance on its ESG report.

Introduce a new Paragraph 9 in Section A of the ESG Guide to state that issuers may seek independent assurance to strengthen the credibility of the ESG information disclosed. Where independent assurance is obtained, the issuer should describe the level, scope and processes adopted for assurance given clearly in the ESG report.

SEHK reiterates that issuers are encouraged, but not required, to seek independent a