KPMG China has completed an analysis of the market reporting practice of over 360 Hong Kong-listed companies in the first year of implementation of the stock exchange’s ESG Guide, which deals with required environmental, social and governance reporting.
The 2017 ESG Reporting Survey of Hong Kong Listed Issuers finds that many companies have yet to demonstrate awareness of significant ESG risks and effective management of their impact:
- More than eight out of ten (84%) of the surveyed companies have not identified any ESG risk as among the principal risks in the business review section of the directors’ report.
- Board engagement in ESG governance is unclear. Only 13% of surveyed companies reporting that the highest level of responsibility for ESG is at the board level; 4% said responsibility lies at levels below the board.
- Only one-third of the surveyed companies disclosed how they identified material ESG issues.
- Only 29% of disclosures mentioned the management system and/or targets set for the relevant ESG topic to demonstrate how the company is managing, monitoring and improving performance.
The bar will be raised higher in the coming years. KPMG warns that “the demand for companies to be more transparent regarding ESG issue is set to persist.”
“Carbon emissions will be a hot topic,” says the report, noting the launch of China’s national trading scheme this year. “The increasing risk of natural disasters will make investors pay more attention to how companies manage their physical risks.”