Only 60% of the largest 200 companies (based on market capitalization) listed on the Hong Kong Stock Exchange (HKEX) published a separate Environmental, Social, and Governance (ESG) report in the financial year of 2015, according to research issued by Alaya Consulting, a specialist sustainability consulting firm.
HKEX increased reporting obligations for companies in 2015 by announcing stricter disclosure requirements for ESG.
Majority (95%) of the published ESG reports adopted either guidelines issued by HKEX or by Global Reporting Initiative. Nearly 70% of the reports disclosed all environmental and social policies as required by the HKEX ESG Reporting Guide. However, only about 25% were able to report performance on all 12 environmental indicators, in addition to policy disclosure on environmental and social aspects.
“Listed companies should realize that adopting sustainable practices is no longer an option but a growing requirement which create both challenges and opportunities,” says Tony Wong, Founder of Alaya Consulting. “Though some findings suggest a strong foundation for reporting, we believe the value of reporting is not well communicated. Companies need to step up their game and start reporting on non-financial information so as to meet the rising market expectations in the coming years.”
With regard to environment sustainability, over 60% of the reports were able to disclose performance indicators and targets on emissions, energy and water consumption, waste generation. Regarding social aspects, 90% of the reports disclosed indicator on training and almost 85% included gender and age composition of the workforce. Ninety-five percent of the reports were able to disclose information on corporate donations and volunteering hours.
The research examines the sustainability reporting practices of the largest 200 companies by market capitalization listed on HKEX. These 200 companies capture approximately 50% of the total market capitalization, encompassing the constituent stocks of Hang Peng Index and MSCI Hong Kong Index.
“In the long term, we believe with their size and resources, these large-cap companies should be able to set industry best practices for companies which have yet to start reporting on ESG in Hong Kong,” concludes Wong.