Will the Consultation Paper of the ESG Reporting Guide be implemented successfully?
The Hong Kong Exchangs (HKEx) published a consultation paper of the ESG Reporting Guide in May 2019, mandating all listed companies to strengthen their disclosure of relevant ESG topics further. The public opinions towards such proposed update are widely divergent, among which some large enterprises even oppose the stricter and more transparent information disclosure of corporate environmental, social and governance performance.
The Chamber of Hong Kong Listed Companies (CHKLC) considers the additional disclosure obligation stated in the consultation paper would impose onerous and cumbersome workload to enterprises. Furthermore, though China Light & Power Company Syndicate (CLP) and other large enterprises have made their quality of disclosure higher than the existing ESG disclosure standard of HKEx, many others should not be mandated to disclose the information that seems not valuable enough to them.
On the contrary, other major exchanges in the world mandate their listed firms to carry out obligations of ESG disclosure. In particular, the Europe and America markets believe that the financial-oriented disclosure requirements are meaningful to companies providing effective and valuable information to investors. Some international investors firmly support the consultation paper published by the HKEx in May, and are calling for Hong Kong to adopt the standards of Sustainability Accounting Standards Board (SASB), which can allow the ESG report to be better aligned with financial information while engaging the Board in the management of ESG issues more proactively.
Given the global trend in ESG reporting industry, it is inevitable that HKEx keeps strengthening the disclosure requirement and enhancing disclosure scope in the ESG report. To Hong Kong, however, of the top priority issue is to explore the potential of ESG information in the report and make enterprises genuinely realise the importance of ESG management and complete information disclosure, which is the premise of companies more proactively and efficiently aligning their ESG results with financial report for investors’ review. We believe that the reason of the controversy around sustainability reports or ESG reports among enterprises is its inherent relevance with financial information as well as the actual fact that its advocacy of social responsibility, carbon reduction, energy efficiency and climate-related risk control appears not substantially correlated with the corporate revenue growth over a short time frame. The short-term thinking on corporate policy research and execution and the long-term train of thought on the promotion of corporate sustainable development are like oil and water. More often than not the short-termism of the enterprise’s management or even the Board is the inhibitor of sustainable development. From the standpoint of the sustainable development of global economy, environment and society, the global sustainable development would be hard to achieve without the collaboration of the privity sector, despite the collective efforts made by the governments and investors.