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HONG KONG, May 29, 2023 /PRNewswire/ -- On 14 April 2023, the Stock Exchange of Hong Kong Limited ("SEHK") published a consultation paper seeking market feedback on proposals to enhance climate-related disclosures under the Environmental, Social and Governance ("ESG") framework. To facilitate better understanding, GreenCo has prepared this executive summary of the key updates. SEHK proposes to mandate all issuers to make climate-related disclosures in their ESG reports, and introduces new climate-related disclosure requirements with reference to the International Sustainability Standards Board ("ISSB") Climate Standard, consisting of four key pillars: Governance, Strategy, Risk Management and Metrics and Targets.
Governance
Issuers are required to disclose the details regarding their governance structure and management approach, including the board's and management's role in assessing and managing climate-related risks and opportunities, the responsibilities of each party, as well as the way and the frequency the Board and committees get informed about climate-related issues.
Strategy
This pillar represents the crucial part of the climate disclosure. Issuers are required to comprehensively disclose their identified climate risks and opportunities, the influence of climate change to their business and financial status (including financial position, financial performance, and cash flows), its transition plans, as well as methodology and results of the scenarios analysis used for determining its climate resilience.
Risk Management
Issuers are required to disclose the process for assessing and prioritising climate-related risks and state the risk-assessment tools applied. Reckoning climate risks is part of the company's overall risk, issuers must also disclose how they integrate the potential and emerging climate risks into their overall risk management approach.
Metrics and Targets
Issuers are required to provide more quantified data including their absolute gross greenhouse gas ("GHG") emissions, covering scope 1, scope 2 and scope 3 emissions. The GHG emissions must be calculated in accordance with GHG Protocol or protocol as required by local legislation. Besides, issuers are required to illustrate the amount and percentage of assets or business activities vulnerable to climate-related risk and aligned with climate-related opportunities, as well as the amount of capital expenditure, financing or investment deployed towards climate-related risks and opportunities. For issuers maintaining internal carbon prices, they need to state the price for each metric tonne of GHG emissions and how they consider carbon pricing during decision-making. In addition, issuers need to report how climate-related considerations are incorporated into remuneration policy.
Issuers should be ready for disclosing climate-related information according to the updated ESG Code for the financial year starting on 1 January 2024. Understanding some provisions are complicated, the Code allows interim provisions (shorter or simpler version) of certain disclosures for the first two reporting years following the effective day. For interim provisions, issuers need to demonstrate the work plans, progress, and timetable for making the mandated disclosures.
The Director of GreenCo, Max Tsang suggests that "In view of the level of complication and the level of resources required to fully comply with the proposed disclosures on top of the current ESG Report framework, we recommend companies get ready earlier by understanding what the new requirements are and what preliminary work has to be planned and done ahead. For example, according to the GHG Protocol, scope 3 emissions cover a wide spectrum of 15 different sources. To facilitate smooth transition to the stricter disclosure requirements, it is highly recommended for companies to get ready ahead of time."
Stephanie Chan, a seasoned consultant of GreenCo, believes that with the renaming of the Appendix 27 from ESG Reporting Guide to ESG Code to emphasise its mandatory nature, issuers will no longer be able to evade the stricter regulations by providing general and brief explanations. "In addition to regulatory requirements, increasing investor demand and stakeholder expectations are also urging companies to take their ESG disclosure a step further to enhance transparency, thereby their reputation and brand value", she added.
GreenCo has extensive experience in preparing climate-related disclosure for companies in various industries. In addition, GreenCo is equipped with professional GHG calculation tools, which can help you navigate the complicated GHG calculation process. Our team consists of professionals from different backgrounds which ensures that your needs can be met.
Since the modification is still under consultation, readers should be aware that the proposed changes mentioned above are yet to finalise. Interested parties are encouraged to respond to the consultation paper by submitting a questionnaire on the HKEX website by 14 July 2023.
Reader should also be aware that this summary does not contain complete information of the Consultation Paper. For more information about the Consultation Paper, please visit the HKEX announcement via:
https://www.hkex.com.hk/News/Regulatory-Announcements/2023/230414news?sc_lang=en
About GreenCo
GreenCo ESG Advisory Limited has been focusing on ESG reporting and sustainability advisory since 2016. GreenCo has members of sustainability associations such as GRI Community and Business Environment Council for years, and our professional consulting group is committed to designing and producing tailor-made ESG advisory services. Over 60 listed companies in Hong Kong and Singapore, together with businesses around the world with distinct business backgrounds covering most industries in Hang Seng Industry Classification System have been in collaboration with us to make inroads into good ESG management and contribute to global sustainable development.
Following international and local frameworks including Appendix 27/20 – ESG Reporting Guide of Rules Governing the Listing of Securities on The Stock Exchange of Hong Kong Limited, United Nations Sustainable Development Goals (UN SDGs), United Nations Principles for Responsible Investment (UN PRI), Global Reporting Initiative (GRI), Task Force on Climate-related Financial Disclosures (TCFD), CDP Guidance Documentation and Questionnaires and S&P Corporate Sustainability Assessment, GreenCo's multi-faceted advisory support has brought the most cutting-edge, insightful and practical solutions to its clients and various industry sectors in the journey to be transparent, sustainable and resilient.
For more details, you can visit our website: www.greenco-esg.com or our ESG public portal https://greenco.valtech.app/app/advisory/greenco-app
Media Contact：Email: esg@greenco-esg.com，Phone: +852-28733612
