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Environmental, Social & Governance ("ESG")

There are increasing public concern regarding companies' ESG performance in addition to financial and operational performance. ESG reporting can help a company to manage the expectations of its stakeholders, including investors, customers, employees and the wider community, with respect to its ESG performance, communicate any strong aspects of this performance and thereby enhance the level of trust in its brand and its reputation.

ESG Reporting can have the following benefits to an entity:

  • Strengthen the level of trust in and reputation of its brand

  • Enhance its corporate governance and provide better insights into and controls over environmental and social risks

  • Comply with government, stock exchange and other regulatory requirements

  • Provide improvement fund-raising opportunities in capital markets

  • Increase customer satisfaction through promoting responsible value chains

  • Improve retention of talent through focusing on employees' growth and development

  • Create shared values between the business and its wider community

ESG Reporting is required under the Hong Kong listing rule requirement:

  • What is the compliance requirement of ESG for FY 2016?
    For financial years commencing on or after 1 January 2016, issuers must state in their annual report or a separate Environmental, Social and Governance (“ESG”) report whether they have complied with the General Disclosures (which are subject to “comply or explain”) under the ESG Reporting Guide (Appendix 27 to the Main Board Listing Rules and Appendix 20 to the GEM Listing Rules) (“ESG Guide” or “Guide”).

  • What is the NEW compliance requirement of KPIs for FY2017 Indicators?
    The disclosure obligation of the Key Performance  (“KPIs”) under “Subject Area A. Environmental” of the revised ESG Guide will be upgraded to “comply or explain” for issuers’ financial years commencing on or after 1 January 2017. This means that issuers will have to disclose in their annual report or a separate ESG report covering their 2017 financial year the information called for under the Environmental KPIs of the Guide, or explain why they have not done so.

  • If not comply, how to explain ?
    Explanations should be as full as necessary to meet stakeholders’ expectation and based on issuer’s own unique circumstances. May consider including action plans for mitigation.

Seven Key Steps to prepare ESG Reporting

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