HK ESG Rules May Lift Mainland Disclosures

Proposals to tighten ESG disclosure requirements for Hong Kong-listed firms are expected to increase pressure on Chinese companies to improve their sustainability reporting. Starting from January 2024, Hong Kong Exchanges and Clearing (HKEX) plans to mandate all issuers to report climate metrics in accordance with the International Sustainability Standards Board (ISSB), aiming to drive higher ESG standards across Greater China. According to Sustainable Fitch, this move could influence mainland Chinese listed companies seeking offshore capital to enhance their sustainability governance reporting. International investors often struggle to assess the financial and impact materiality of ESG factors for Chinese companies due to limited experience and knowledge in ESG reporting, it added. The upcoming rules will make HKEX-listed companies subject to the most stringent ESG disclosure requirements in the region. These regulations, outlined in a consultation paper published in April 2023, mark a significant upgrade from the current ‘comply or explain’ status of mandatory reporting. The new rules align with the Task Force on Climate-related Financial Disclosures, with a focus on disclosing climate-related metrics such as Scope 3 greenhouse gas emissions, cross-industry metrics, and internal carbon pricing.

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