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Hong Kong Exchange Urges Businesses for Enhanced Climate Reporting Standards

Issuers listed on the Stock Exchange of Hong Kong are encouraged to begin planning and constructing the infrastructure and systems required to meet future climate reporting requirements, as the exchange seeks to enhance climate-related disclosures in accordance with the Task Force on Climate-related Financial Disclosures (TCFD) framework and the new International Sustainability Standards Board (ISSB) climate standards.

The advice was issued as part of an exchange-published evaluation of ESG disclosures, which focused on board governance and oversight of ESG concerns, as well as the management of climate-related risks, and was based on 2020 standards. The exchange sampled the ESG reports of 400 issuers for the report.

According to the exchange, the study revealed significant progress in ensuring that boards give ESG issues the proper attention. More than 95% of issuers disclosed their boards' oversight and management approach on ESG issues, while 85% of issuers chose to disclose information on all new climate-related requirements, such as consideration of significant climate-related risks and mitigation measures, setting of certain environmental targets, and reporting on scope 1 and scope 2 GHG emissions. In addition, the report indicated that around one-third of issuers analyzed had begun reporting on Scope 3 emissions and that approximately five percent have used climate-related scenario analysis for climate resilience assessment.

In the report, the exchange stated that it is currently reviewing its ESG framework "with a focus to enhance climate disclosures amongst our issuers." Aligning with the TCFD recommendations and ISSB standards would significantly increase reporting requirements beyond the current exchange rules, with framework requirements including reporting on climate plans, Scope 3 value chain emissions, and performance of climate scenario analysis.

The exchange has put out a lot of guidance and training materials, like climate disclosure guidance, to help issuers make climate change reports that comply with TCFD.

The assessment also recommended that issuer ESG reports contain information on supply chain risk management and green procurement practices and that ESG reports and annual reports be released simultaneously. ESG Rules mandate the sharing of information on the board's progress review and the results of the review.

Bonnie Y Chan, Head of Listing at Hong Kong Exchanges and Clearing Limited (HKEX), remarked:

"As the hub of Asia's capital markets, HKEX is ideally positioned to help advance the broad sustainability agenda across our markets. Through listing regulation, advocacy, and education, we are committed to encouraging high ESG disclosure and practise standards among our issuer community."

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