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Hong Kong Stock Exchange - 2022 Analysis of ESG Practice Disclosure

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    The Exchange published its 2022 Analysis of ESG Practice Disclosure on 25 November 2022 (the Report). It sets out the Exchange's findings regarding compliance by listed companies with the Environmental, Social and Governance (ESG) Reporting Guide contained in Appendix 27 to the Hong Kong Listing Rules (the ESG Reporting Guide), particularly in relation to the amendments that apply to ESG reports for financial years commencing on or after 1 July 2020 (the 2020 Amendments).

    The Exchange analysed ESG reports published by 400 issuers across a range of different industries.  Their ESG reports relate to financial years that ended in 2021 and 2022.

    Generally speaking, the Exchange noted that compliance with the 2020 Amendments is quite high.

    However, it is important to note that the Exchange has made a large number of detailed recommendations in the Report, which are set out below.  Although some of these recommendations are not new, it serves as a reminder of some important disclosure topics.  Listed companies are also reminded that for financial years commencing on or after 1 January 2022, ESG reports should be published at the same time as annual reports.

    Board governance of ESG issues

    2020 Amendments

    The 2020 Amendments require all issuers to disclose a board statement regarding (i) its oversight of ESG issues, (ii) its ESG management approach and strategy (including the process to evaluate, prioritise and manage material ESG-related issues), and (iii) how the board reviews progress made against ESG-related targets, with an explanation of how it relates to the issuer's business1.

    Exchange's recommendations

    In relation to (ii) above, the issuer should disclose information enabling readers to understand the process, such as elaborating on the:

    • relevant expertise or skills of the board, or the designated committee or management level positions, for effective oversight on ESG matters;
    • interaction between the board and the designated committee or the management-level positions, including the frequency and form of reporting to the board;
    • frequency of the board’s discussion on ESG issues;
    • internal and external resources and expertise available for the ESG management process; and
    • alignment of ESG governance with an issuer’s business strategy.

    In relation to (iii) above, the discussion on the approach of how the board reviews progress may include the following:

    • measurement system or industry benchmark adopted for progress assessment;
    • process for data collection and verification; and
    • comparison with the historical data and how the baseline is selected.

    In addition, issuers should provide the results of the review, especially for targets set for different timeframes.

    • If targets are not achieved, issuers should disclose the reasons, the board’s discussion or assessment on what could be done to achieve the targets, and whether the target should be adjusted.
    • If the progress is satisfactory, the issuer may include information on whether the trend can be maintained or whether it will be affected in the future (and if so, why and what could be done about it).

    Climate change

    2020 Amendments

    The 2020 Amendments require all listed companies, on a "comply or explain" basis, to:

    (i) climate-related scenario analysis: consider significant climate-related issues which have impacted, or may impact, the listed company and how it could mitigate such issues2;

    (ii) environmental targets: develop targets and plans in respect of reduction of emission and waste, and improving efficiency in energy and water use3; and

    (iii) greenhouse gas emissions: disclose scope 1 and scope 2 greenhouse gas emissions4.

    Exchange's recommendations

    (i) Climate-related scenario analysis

    • A climate-related scenario analysis is recommended by climate reporting frameworks to analyse a company's resilience of its strategy to climate change.
    • Issuers will need to set the scope and boundary to confirm the scenarios (which are hypothetical pathways of development) to be adopted.  It is critical that the scope and boundaries represent the issuer's material business operations.
    • Issuers may refer and adapt publicly available scenarios to reflect their situation.  Issuers are also recommended to develop at least two scenarios for comparison.
    • Issuers should then identify physical and transition risks parameters that are material to their operations, and collect relevant data to evaluate their impacts under different scenarios.

    Please also refer to the Exchange's Guidance on Climate Disclosures for further information. 

    (ii) Environmental targets

    • The Exchange recommends listed companies to set quantitative targets where feasible (even though targets may be numerical figures or directional / forward looking statements).  This is because quantitative targets are often requested by climate reporting frameworks or investors.
    • Directional statements may be relevant when new climate-related initiatives are being launched, or in the absence of a baseline from past performance.  However, listed companies should start collecting and disclosing numerical data as soon as possible.
    • If certain metrics are irrelevant or immaterial, listed companies should give a detailed explanation on the analysis and refer to the materiality assessment where relevant.

    (iii) Greenhouse gas emissions

    • The ESG Reporting Guide envisage that listed companies should disclose separate scope 1 and scope 2 greenhouse gas emissions, which is in line with international recommendations (however, some listed companies disclosed a total figure for both scope 1 and scope 2 greenhouse gas emissions).
    • Scope 3 greenhouse gas emissions occur in the value chain of the company (i.e. emissions from upstream / downstream activities), which can provide investors with a better picture of the listed company's carbon footprint.
    • Although the ESG Reporting Guide does not currently require scope 3 greenhouse gas emissions to be reported, listed companies should consider reporting as soon as practicable (as this is contemplated under the new International Sustainability Standards Board (ISSB) recommendations.
    • As the calculation of scope 3 greenhouse gas emissions is quite complex, the Exchange suggests issuers to calculate and report their data by:
    • identifying the scope and types of emissions in, and the categories of significant upstream or downstream activities along, the value chain to be included in the reporting based on a materiality assessment;
      • identifying the scope and types of emissions in, and the categories of significant upstream or downstream activities along, the value chain to be included in the reporting based on a materiality assessment;
      • determining a feasible and effective method to collect and verify emission data;
      • applying appropriate calculation methods to quantify emissions from different activities; and
      • consistently disclosing emission figures with reference to reporting frameworks. 
    • Further guidance regarding the reporting of scope 3 greenhouse gas emissions can be found in paragraph 44 of the Report. 

    Future developments

    • The Exchange is reviewing the ESG Reporting Guide, and plans to enhance climate disclosure requirements to mirror international developments.
    • Although the ISSB climate standards have not been adopted in Hong Kong yet, listed companies should familiarise themselves with the climate disclosure requirements under the ISSB climate standards and identify gaps in internal policies and practices.

    Social issues

    2020 Amendments

    The 2020 Amendments:
    • upgraded the disclosure obligation of all social KPIs from a voluntary standard to a “comply or explain” standard;
    • introduced new KPIs in respect of supply chain management5; and
    • introduced a new KPI regarding anti-corruption training provided to directors and staff6.

    Exchange's recommendations

    Supply chain

    Hong Kong aims to achieve carbon neutrality before 2050.  A company's supply chain plays an important part in operating a sustainable business and transitioning Hong Kong to a low carbon economy.

    Listed companies may consider disclosing the following matters in their ESG reports, to enable stakeholders to understand its supply chain risk management:

    • persons or teams responsible for managing supply chain sustainability and their duties;
    • process for identifying significant environmental and social risks along the supply chain, and how to assess the impact of such risks on the issuer’s business operations;
    • actions taken or to be taken to mitigate or address the environmental and social risks in the supply chain;
    • how suppliers are selected, and how such factors promote green procurement; and
    • measures for monitoring supply chain risks and green procurement practices.


    Listed companies are reminded that they should include information on the scope and method of the anti-corruption training, the audience as well as the frequency of the training provided.

    Please refer to Anti-Corruption Programme - A Guide for Listed Companies and Ethics Promotion Programme for Listed Companies, both published by the Independent Commission Against Corruption, for further information.

    Reporting practices

    2020 Amendments

    The 2020 Amendments:

    • required listed companies to explain how they applied the reporting principles7 and the reporting boundaries8 set out in the ESG Reporting Guide;
    • encouraged listed companies to obtain independent assurance, and enhanced disclosures if such assurance is obtained9.

    Exchange's recommendations

    Reporting principles

    • Listed companies should provide details on how they applied the reporting principles – merely restating the principles is not considered compliance with the requirement.
    • Disclosure of numerical figures on its own is not sufficient for investors to assess the company's ESG performance – the "qualitative" reporting principle requires listed companies to disclose the methods, standards and assumptions adopted in deriving quantitative metrics and targets.
    • Listed companies should use consistent methods to allow for meaningful comparisons of ESG information over time.  If there is no change to the methods / KPIs used, issuers should state so in their ESG report for transparency.  Details of any changes to the methods / KPIs used and the rationale behind, or any other factors which may affect a meaningful comparison, should also be disclosed.

    Reporting boundaries

    • In addition to stating the boundaries of their ESG reports, listed companies should also describe how they arrived at such decision.  Setting an overall reporting boundary for the ESG report does not prevent issuers from adopting a different boundary for certain aspects or KPIs, as long as it is clearly stated in the ESG reports.
    • If there are any changes in the reporting boundary, e.g. due to acquisition or disposal of subsidiaries, issuers should specify the changes in the ESG reports. 

    Independent assurance

    • Issuers may choose to obtain assurance for part(s) of the ESG reports or for certain data (e.g. greenhouse gas emissions), so long as the scope of assurance is clearly set out in the ESG reports.
    • Although there is currently no globally accepted assurance standards for ESG reports, listed companies may refer to the standards set out in (i) ISAE 3000, which is the standard for assurance over non-financial information issued by the International Auditing and Assurance Standards Board, or (ii) guidance issued by the Hong Kong Institute of Certified Public Accountants relating to assurance of ESG information.

    Other matters

    Issuers are reminded that ESG reports for the financial year commencing on or after 1 January 2022 should be published at the same time as the annual report.

    Please also refer to the Exchange's ESG Academy, which provides further guidance on ESG generally.

    If you have further queries on this topic, please reach out to your usual Ashurst contact or the persons mentioned below.


    1. Paragraph 13 of the ESG Reporting Guide (Appendix 27 to the Hong Kong Main Board Listing Rules)
    2. Aspect A4 of the ESG Reporting Guide
    3. KPIs A1.5, A1.6, A2.3, A2.4 of the ESG Reporting Guide
    4. KPA A1.2 of the ESG Reporting Guide
    5. KPI B5.3 and B5.4 of the ESG Reporting Guide
    6. KPI B7.3 of the ESG Reporting Guide
    7. Paragraph 14 of the ESG Reporting Guide
    8. Paragraph 15 of the ESG Reporting Guide
    9. Paragraph 9 of the ESG Reporting Guide


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