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How can Hong Kong-listed companies improve their ESG reporting practices?

How can Hong Kong-listed companies improve their ESG...

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On 18 May, the Stock Exchange of Hong Kong Limited (HKEX) published the Analysis of Environment, Social and Governance Practice Disclosure in 2016/17 (Chinese version / English version). This report analysed Environmental, Social and Governance (ESG) reports made by 400 randomly-selected companies listed in Hong Kong. 

The HKEX survey's results and recommendations are important indicators for what it considers to be compliant with HKEX requirements and good practices for ESG reporting. Companies who are listed in Hong Kong, including those headquartered in mainland China, will benefit from being informed of these recommendations at the earliest opportunity.

Areas for improvement

The HKEX report identifies a number of areas for improvement in the ESG reporting based on its survey, including:

Governance

  • The board's involvement in the ESG reporting process is important

Materiality assessment

  • Some issuers identified material aspects without disclosing how they arrived at their selection

Compliance

  • Non-compliance without giving considered reasons amounts to breaching the HKEX Listing Rules
  • A small percentage of the disclosures were vague or only partially responded to the disclosure requirements and were therefore considered "non-compliant"
  • Reporting on an issuer's policy was made without any details on what the policy might pertain
  • For aspects where there are laws and regulations relevant to the issuer's particular industry which may have a significant impact on the issuer, the ESG report should specify the relevant laws and regulations as well as the ways in which the issuer has ensured compliance with them.
  • The ESG report should also elaborate on aspects that do not involve any laws and regulations posing a significant impact to the issuer.

Some HKEX comments on individual ESG reports:

  • "Box-ticking approach"
  • "Uninformative and simple statements"
  • "Disclosures were not helpful to stakeholders"
  • "Lengthy narratives that purported to respond to the disclosure requirement"
  • "Lengthy narratives that were vague and difficult to read".

How KPMG can help companies improve their ESG management and reporting

KPMG can:

  1. Assist in establishing a mechanism to engage a company’s board in ESG matters, including the board's ESG governance, identification and assessment of ESG risks and opportunities, and related internal control systems 
  2. Advise on the establishment of an ESG Working Group
  3. Assist in producing a materiality analysis on how a company's environmental and social impact compares with the Global Reporting Initiative standards to help their ESG reports more readable and salient, and show stakeholders their determination and approach to ESG reporting
  4. Assist in preparing reports that meet reporting principles and fully respond to various disclosure requirements.

More information

Click the links to read the HKEx's Analysis of Environment, Social and Governance Practice Disclosure in 2016/17 (Chinese version / English version).

Contact us for more information:

Patrick Chu
Partner, Head of Business Reporting and Sustainability
Email: patrick.chu@kpmg.com
Julie Wong
Senior Manager, Business Reporting and Sustainability
Email: julie.wong@kpmg.com
Eva Wei
Manager, Business Reporting and Sustainability
Email: eva.f.wei@kpmg.com

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