Hong Kong Stock Exchange tightens climate disclosure rules

May 16, 2023|Written by Moriah Costa|Hong Kong Monetary Authority

The Hong Kong Stock Exchange (HKEx) is planning to tighten its climate disclosure rules, requiring listed companies to reveal their climate-related risk starting in January as it hopes to strengthen its position as a financial centre.

“More and more investors are engaged in green investments, resulting in an increasing demand for quality sustainability and climate-related disclosures from companies… Having ESG and net-zero principles integrated into business strategy only makes a company more agile and better prepared to deal with risks and uncertainties,” the exchange stated in a consultation paper published in April.

The HKEx currently has a “comply or explain” rule, which asks companies to make climate-related disclosures or justify their absences. However, the changes would mandate all listed companies to disclose climate-related information.

The exchange outlined four areas of proposed disclosures under the new proposed rules: governance, strategy, risk management, and metrics and targets.

Companies would be required to reveal details of their transition plans, measure and disclose scope 1, 2, and 3 emissions, and disclose risks and opportunities related to climate change. In addition, they would have to disclose their governance process and climate resilience, and maintain an internal carbon price.

The changes would be aligned with standards developed by the International Sustainability Standards Board. Companies will be required to describe measures but won’t have to quantify them until 2026.

“HKEx is clearly making the right push to expand climate-related disclosure to include physical risks, but it must ensure that listed companies’ risk assessment timeframes match the climate risk. For example, long timelines to capture tail risks brought on by chronic risks such as sea-level rise and basin water scarcity,” said Dharisha Mirando, finance engagement and water risk valuation lead at the Hong-Kong-based nonprofit China Water Risk.

Stakeholders have until 14 July to submit their responses to the proposed changes.

The Hong Kong government has set a goal of becoming carbon neutral by 2050. Meanwhile, the Hong Kong Monetary Authority has set out steps to support green finance and a low-carbon transition.

This page was last updated May 16, 2023

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