The Hong Kong Stock Exchange announced this week it will require listed companies to strengthen reporting on environmental, social and governance (ESG) matters, responding to investor demand for greater transparency in these areas. Many changes will take effect January 1, 2016. A transition to mandatory reporting for key performance indicators such as greenhouse gas emissions will phase in by January 1, 2017.
This announcement follows the issuance by the World Federation of Exchanges (WFE) of an agreed upon set of ESG metrics that it believes companies should report to help investors gauge long-term financial health. These first of their kind recommendations, released in November 2015, leave it up to each member exchange to decide whether such discharges would be voluntary or mandatory. The WFE is a global trade association for exchanges and clearing houses involving over 44,000 companies with a trading value of $76 trillion.
There is growing momentum worldwide to require more mandatory ESG reporting by companies in annual filings. The Ceres-led Investor Network on Climate Risk in 2013 proposed that companies listed on the U.S. and global stock exchanges be required to include a series of ESG disclosures in their annual financial filings. Initiatives of this kind increasingly are being proposed and implemented as is the case with the Hong Kong Exchange.
The Stock Exchange of Hong Kong Limited (the Exchange) is a wholly-owned subsidiary of Hong Kong Exchanges and Clearing Limited (HKEx). The Exchange is the third largest in Asia in terms of market capitalization.
More information about the ESG reporting guidelines is available in the Exchange’s press release.