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Ongoing advice

As a corporate finance law firm, we advise on all aspects of company and securities law and regulation to both listed and non-listed companies. We are the trusted adviser at board level of a number of our listed company clients many of which we have advised since their initial listing.

We provide continuing on-going advice to companies listed on both the main board and GEM market of the Hong Kong Stock Exchange regarding compliance with their continuing obligations under the Listing Rules and relevant laws including disclosure obligations, insider dealing, disclosure of interests, share buy-backs and the Takeovers Code.

Charltons corporate finance law firm provides both initial and ongoing directors’ training to directors of listed companies as an informational tool for directors and in order to enable directors to comply with their Listing Rules requirements and as part of the Hong Kong Stock Exchange’s requirements for ongoing education for directors.

We also update our clients on changes and proposed changes to Hong Kong laws and regulations and Listing Rules which may affect them.


ESG Reporting for Companies Listing on the Hong Kong Stock Exchange

The Hong Kong Stock Exchange (the Exchange) published its Environmental, Social and Governance Reporting Guide (the ESG Guide) in August 2012 following a public consultation and the ESG Guide is now incorporated in the Exchange’s Listing Rules as Appendix 27 of the Main Board Listing Rules and Appendix 20 to the GEM Listing Rules.

The rationale for the introduction of the ESG Guide was to introduce ESG issues to Hong Kong issuers, raise ESG awareness, encourage issuers to start ESG reporting and bring ESG disclosure of Hong Kong issuers closer to international practices.

A Voluntary Regime for Hong Kong

Adoption of the ESG Guide is currently voluntary: MB Listing Rule 13.91 provides:

13.91 Issuers are encouraged to include information set out in Appendix 27 in the annual report regarding the same period covered in the annual report, or as a separate report.”

Issuers choosing to adopt the ESG Guide should do so for financial years ending after 31 December 2012.

Although ESG reporting is not compulsory under the Listing Rules, the Exchange has announced plans to escalate the voluntary obligation to a “comply or explain” mechanism by 2015 and a consultation on this is expected to commence in the first half of 2015. This would mean that issuers who do not report on ESG would be required to give considered reasons for not doing so in their annual reports.

Hong Kong incorporated companies (Hong Kong companies) are in any event already subject to higher ESG disclosure requirements under the new Companies Ordinance (Cap. 622) which came into effect in March 2014. This requires Hong Kong companies to disclose certain ESG matters in a “Business Review” section of their Directors’ Report.

The ESG Guide sets out what should be disclosed under each of four ESG subject areas: Workplace Quality, Environmental Protection, Operating Practices and Community Involvement.

The ESG Guide is intended primarily for issuers who are not familiar with ESG issues and are looking for a starting point to begin ESG reporting. A higher level of ESG reporting based on international guidance and standards may be adopted; the Exchange strongly recommends that issuers adopt international guidelines instead of the ESG Guidelines if they are able to do so. International guidelines that issuers may consider include: Global Reporting Initiative’s Sustainability Reporting Guide, the Carbon Disclosure Project, and the KPIs for ESG – A Guidelines for the Integration of ESG into Financial Analysis and Corporate Valuation (version 3.0) published by the Society of Investment Professionals in Germany.

Reporting period

ESG disclosure can be included in the annual report for the same period covered by the annual report. Alternatively, issuers can include the information in a separate report which need not be issued at the same time, or cover the same period, as the annual report. The Exchange however encourages issuers to report on the same period as for their annual reports (Paragaph 4 of Appendix 27). The report can be published in printed form or on the issuer’s website.

Preparing the ESG Guide

The issuer’s board of directors should be primarily responsible for the preparation of ESG reports, although the compilation of the report may be delegated to employees or a committee that reports to the board.

General steps in preparing an ESG report include establishing a working team, engaging stakeholders, conducting a materiality assessment, defining the desired reporting boundary, collecting data internally and externally and writing the ESG report.

Key ESG Subject Areas

The ESG Guide sets out four key subject areas for reporting:

  1. Workplace Quality
  2. Environmental Protection
  3. Operating Practices
  4. Community Involvement

Corporate governance is not included as it is dealt with separately in the Corporate Governance Code in Appendix 14 of the Main Board Listing Rules and Appendix 15 of the GEM Listing Rules.

Each of the above areas is divided into three sections:

  1. Aspect(s) – ESG aspects for each area;
  2. General disclosure – general disclosure recommendations; and
  3. KPIs – disclosure that issuers can make to measure its performance under each area.


Since the ESG Guide is designed to help issuers start ESG disclosure and move towards the adoption of international best practice, it allows issuers considerable.

The Exchange does not expect listed issuers to report on all their operations from the start. They may prioritise those areas, aspects and KPIs that are relevant to their business and those having material environmental and social impact. Definitions are not provided for each KPI in the ESG Guide. Issuers are therefore encouraged to explain how the KPIs are calculated and include information that is necessary for interpreting the KPIs.

Issuers are encouraged to state in their ESG reports which group entities and/or which operations have been included in the report. This could be done by geographical scope (e.g., Hong Kong operations, but not those in the Mainland or elsewhere) or by business (e.g., only covering one aspect of your business, but not another). If an issuer changes the scope of its ESG reporting, it is encouraged to explain the difference and reason for the change.

Once an issuer starts reporting, it should continue to do so on a regular basis. The aspects and KPIs reported can either be consistent for each period or any change can be explained. Issuers can also explain why some aspects and KPIs are not reported.

Materiality means determining which issues and relevant to an issuer’s business. Generally, material topics are those that have a direct or indirect impact on an organisation’s ability to create, preserve or erode economic, environmental and social value for itself, its stakeholders and society at large. Companies should take into account the views of its internal and external stakeholders in assessing material issues.

The Exchange has created a toolkit which contains a materiality matrix tab that companies may use to process their results of internal and external assessments in order to find a recommended reporting scope. This is available on the Exchange’s website at

Issuers with the capability are also encouraged to go beyond the ESG Guide to adopt international reporting guidelines and make additional disclosure.

The Exchange has also published FAQs on ESG reporting which are available on its website at

Continuing obligations

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