How the sustainability disclosure landscape is evolving

Dr Robin Kennish, Director Corporate Sustainability & Climate Change – ERM
Summer Chen, Senior Consultant, Climate Change – ERM

Hong Kong Stock Exchange (HKEX) has been advancing requirements for sustainability reporting for listed companies with the intention of raising the bar to meet prevailing international practice. The HKEX Environmental Social Governance (ESG) Reporting requirements came into effect in July 2020 and since then HKEX published (November 2021) new guidance on climate disclosure to facilitate reporting in line with the Task Force of Climate-related financial Disclosure (TCFD).  Hong Kong’s Securities and Futures Commission (SFC) also finalised (August 2021) amendments to the Fund Manager Code of Conduct (FMCC) that will require fund managers to take climate related risks into consideration in the investment and risk management process. 

Internationally, there have been three major sustainability disclosure proposals released earlier this year to guide on how to report on, and assess, climate-related risks.  They come at a pivotal time in corporate disclosure and have significant implications for investors and issuers in Hong Kong.

  1. In the United States, the SEC’s March 2022 proposal, Enhancement and Standardization of Climate-Related Disclosures for Investors, focuses on the protection of investors in publicly traded companies in the U.S.
  2. In Europe, the EFRAG’s April proposal, European Sustainability Reporting Standards (ESRS) to inform the EU’s Corporate Sustainability Reporting Directive (CSRD).
  3. The ISSB’s March proposal, General Requirements for Disclosure of Sustainability-related Financial Information and Climate-related Disclosures exposure drafts to guide individual jurisdictions and regulators.

While the SEC, ESRS, and ISSB proposals deal with similar material, they differ in certain aspects, including their enforceability, jurisdictional scope, substantive scope of coverage, and detailed requirements. The Evolution of Sustainability Disclosure was jointly authored by the SustainAbility Institute by ERM (‘ERM’), ERM’s primary platform for thought leadership on sustainability, and Persefoni, the leading carbon management and accounting platform.  It profiles these three proposals, focusing on the components related to climate-related risk and opportunity disclosure and the use of the TCFD guidance.

Key takeaways and implications for HK corporate disclosure include:

– SEC: Comments are due June 17, 2022

– ISSB: Comments are due July 29, 2022

– ESRS: Comments on ESRS are due by August 8, 2022

ERM and Persefoni encourage corporate issuers, investors, and other stakeholders to participate in the public consultation process for these proposals to help drive momentum towards a consistent global reporting baseline.


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