Companies resist Hong Kong ESG disclosure proposal

Some of Asia’s biggest companies are pushing back against plans from the Hong Kong Stock Exchange to demand greater disclosure on environment, social and governance issues.

In May, HKEX proposed forcing listed companies to publish statements about ESG-related risks. But the Chamber of Hong Kong Listed Companies, whose members include Tencent and China Mobile, said it wants the exchange to leave disclosure to the discretion of companies.

“Too many additional obligations will add to compliance challenges,” Mike Wong, chief executive of the chamber, said in an email to the Financial Times. “The additional disclosure requirements are rather onerous and cumbersome.”

The fight pits Asian companies against some of the world’s largest asset managers, who are supporting the new disclosures, just as Asia is pulled into the global sustainable-investing wave. Hong Kong is also facing increasing competition from exchanges in China to list mainland firms.

If adopted as proposed, the rules would require companies to disclose additional information about risks related to climate change and new details about greenhouse gas emissions. The exchange has said it wants to implement the disclosure proposals from next year.

While some large companies such as China Light and Power are going “over and beyond” the HKEX’s current ESG disclosure standards, other companies “should not be pressed to disclose something that carries no apparent value to them”, the chamber said in a July 19 submission to HKEX.

A spokesman for HKEX declined to comment.

The Hong Kong corporate community’s resistance to mandatory ESG disclosures contrasts with some other major markets. The UK is exploring mandating companies disclose climate-related risks, while France requires investors in the country to disclose how they handle ESG criteria.

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In Asia broadly, ESG investing is in its infancy. The US and Europe account for about 80 per cent of the world’s sustainable investing assets and Japan accounts for about 6 per cent, according to a JPMorgan report this month. China and Hong Kong are still developing ESG frameworks and standards, the bank noted.

But Hong Kong started to push ahead on ESG this year. The territory’s Securities and Futures Commission published guidance on disclosures and the Hong Kong Monetary Authority has set goals for green finance.

Some international investors are keen for these plans to advance. Boston-based State Street Global Advisors applauded HKEX’s proposal in a July 18 letter. “Disclosure requirements focusing on financial materiality would aid companies in efficiently and meaningfully providing information to investors,” said State Street, which also called for Hong Kong to embrace the work of Sustainability Accounting Standards Board (SASB) as a way to harmonise ESG reporting.

The Asia Corporate Governance Association, whose members include the giant California retirement funds Calpers and Calstrs, as well as companies such as UBS Asset Management and T Rowe Price, said it strongly endorses the need for corporate boards to oversee ESG and sustainability reporting.

“It is apparent that many boards are not reading their own sustainability reports, nor discussing material ESG risks and opportunities in any detail,” the ACGA said.

The International Corporate Governance Network (ICGN), whose members include the Ontario Teachers’ Pension Plan, Hermes Investment Management and Nissay Asset Management, acknowledged that mandatory ESG disclosure “may be provocative to some listed companies”, but said such requirements would “kick into play” ESG reporting.

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