BDO Hong Kong

Environmental, social and governance (ESG) factors are continuing to gain traction in corporate reporting regimes and the financial institution sector from the standpoints of long-term sustainability and responsible investment. Users and investors are demanding an increasingly high quality of ESG information disclosed by listed companies in order to facilitate decisions about investment, interest and value alignment, business partnerships, and joint efforts to overcome global challenges.

Revised ESG Reporting requirements

The Hong Kong Stock Exchange revised the Environmental, Social and Governance Reporting Guide (the Reporting Guide) in December 2019 and the new disclosure requirements came into effect for those listed companies with financial years beginning on or after 1 July 2020. Key changes to the Reporting Guide include:

Introducing mandatory disclosure requirements to include:
- a board statement setting out the board's consideration of ESG matters;
- application of reporting principles 'materiality', 'quantitative' and 'consistency'; and
- explanation of reporting boundaries of ESG reports;
Requiring disclosure of significant climate-related issues which have impacted and may impact the issuer;
Amending the 'environmental' key performance indicators (KPIs) to require disclosure of relevant targets;
Upgrading the disclosure obligation of all 'social' KPIs to 'comply or explain'; and
Shortening the deadline for publication of ESG reports to within five months after the financial year-end.

How can BDO help

BDO Risk Advisory Services team possesses experience and expertise in ESG reporting and risk management and allow us to support you with a broad range of ESG services that can be tailored to meet your needs. Our support covers the following areas:

- ESG governance and reporting

Our ESG professionals can help review your ESG reporting processes including materiality assessment, data collection and compilation, methods of reporting and disclosure mechanism in fulfilling current reporting requirements or adoption of international reporting standards such as GRI. With our extensive knowledge in ESG reporting accumulated from our ESG Reporting Performance Surveys, we can benchmark your company's reporting with latest industrial practices and make recommendations to enhance your reporting transparency. Our ESG governance and reporting services also cover:

ESG governance review
ESG risk management review
Stakeholder engagement
Target setting of environmental and social KPIs
Board awareness training on ESG
Mapping and integrating UN Sustainable Development Goals (SDG) into strategy

- Climate-related services

Our professionals can help you to understand how your business operations may be exposed to climate-related physical risks and the potential impact of regulatory and economic under the transition to a low-carbon economy. We can help develop comprehensive response that address risks and seize opportunities along the transition pathway. Our climate-related services also cover:

Greenhouse gas management
Mapping climate-related risks
Climate resilience business strategy advisory
Climate change risk assessment
Verification of carbon footprint

- Supply chain risk management and audit

When a supply chain is disrupted, the company is at risk of failing to meet production or delivery commitments it has made to its customers. The Reporting Guide requires listed companies to identify and mitigate ESG risks along the supply chain. These risks may relate to trade ethics, corruption, child labour, carbon or water footprint, human rights violation, environmental breach, contract management, data protection, etc. Our professionals can help manage your supply chain risks by providing a risk-based, systematic supply chain due diligence and making practical recommendations.

- Independent assurance on ESG report

Independent assurance can enhance the credibility of the ESG information disclosed by a company and the quality of the company’s ESG reporting. It can provide investors with more reliable data for analysis. The Reporting Guide recommends that listed companies may seek independent assurance on their ESG reports. We can help provide an independent assurance on your ESG report including certain ESG data, content of the report, compliance with international reporting frameworks, etc.