New update on ESG reporting requirements for listed issuers in Hong Kong

July 23, 2020

New ESG reporting requirements have been introduced by the Hong Kong Stock Exchange effective for financial years beginning on or after 1 July 2020. There are three key changes: (i) All previous disclosures that were recommended have been upgraded to now follow the “Comply or Explain” provision regime; (ii) A new ESG aspect “climate change” has been added, and along came additional disclosures related to this aspect; and (iii) a new disclosure category has been added called “Mandatory Disclosure Requirements” (MDR).

Changes to the Listing Rules in relation to ESG reporting requirements

Prior to 1 July 2020 there were two levels of disclosure categories as per section 13.91 of the Main Board listing rules (section 17.103 in GEM rule): (i) the “Comply or Explain” Provision which follows the disclosure regime similar to the Corporate Governance Code where issuer should make appropriate disclosure otherwise state considered reasons, and (ii) the “Recommended Disclosure” where disclosures are encouraged but not mandatory.

As of 1 July 2020, the listing rules have been amended to add a new disclosure category called Mandatory Disclosure Requirements ("MDR") which requires mandatory disclosures related to matters such as board involvement, materiality assessment and reporting principles. Additionally, all previously recommended disclosures have been upgraded to follow the “Comply or Explain” provision regime and a new ESG aspect “climate change” has been added along with additional related disclosures. The difference is summarised in the table below:

Disclosure categories

Prior to 1 July

1 July onwards

“Comply or Explain” Provisions ("CP")

Environmental areas (General Disclosures + KPIs) & Social areas (General Disclosures only)

Environmental & Social

(all General Disclosures + KPIs)



Recommended Disclosures ("RD")

Social (KPIs)



Mandatory Disclosure Requirements ("MDR")




(Various additional disclosures)

Impact on disclosures for financial periods starting 1 July 2020

  • Significant changes related to the preparation and disclosure of some KPIs means that a different disclosure approach is required. For KPIs, HKEx has begun to move away from disclosures of merely historical (i.e. result achieved) to more of a forward-looking in nature. For example, the setting and the evaluation of goals and targets.
  • With the exception of the few issuers who have a small number of employees, the upgrade of all social aspect KPIs from RD to CP means that most issuers will need to increase their information collection capacity compared to what they had previously.

  • The additional disclosure of “Climate Change” and its related KPIs may or may not be material depending on the listed issuer’s overall ESG material assessment. Otherwise an explanation giving considered reasons will be required to fulfill this required disclosure.

  • The changes start to apply for financial periods starting on or after 1 July 2020. Early adoption will enable better preparedness for any gaps in these required disclosures and tackling any potential problem early will help avoid pitfalls.

Topics: Regulatory Updates & News, ESG, Hong Kong SAR, GRC, Investor Services, Listed Issuers

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