Environmental, social and governance (ESG) issues are not simply a matter of compliance, but of certain weight whereby investors are actually putting ESG factors into their investment decisions. Due to growing concerns over climate change, investors are demanding more information about companies’ ESG approaches alongside financial data.
Hong Kong, being the world leading global financial center, is not doing well when it comes to ESG disclosure. Listed issuers over the past years have been generally doing a box-ticking exercise aimed at meeting the “comply or explain” provisions of the HKEX ESG Reporting Guide (Appendix 27 of Main Board Listing Rules). With an original intention to enhance issuers’ transparency on non-financial risks, so as to allow informed investment decisions, many of the ESG reports sadly were not up to HKEX’s expectations.
Despite the help of the ESG Reporting Guide, companies tend to observe what is required but not recommended. These recommendations often relate to equally significant ESG issues and addressing these would unquestionably add more value to the ESG report. Hence, companies’ mindsets have to be changed in a way that ESG risks could be accurately and seriously addressed, so as to publish reports that are truly valuable to investors. The board thus plays an important role in driving effective ESG risk management and facilitating external and internal assessment of the actual impacts brought by ESG risks on their business.