PricewaterhouseCoopers: ESG disclosure of Hong Kong-listed companies has entered a fully mature stage.

PwC has been conducting research on the Environmental, Social, and Governance (ESG) reports of Hong Kong-listed companies for eight consecutive years. Today, PwC released this year's report, focusing on the maturity of ESG disclosure, climate disclosure, and biodiversity as three main themes. The report found that ESG disclosure has entered a comprehensive mature stage, with over 70% of sample companies disclosing all ESG issues in their reports; listed companies are actively responding to new climate regulations, establishing an information disclosure framework based on governance, strategy, risk management, indicators, and targets; biodiversity management and disclosure are gradually becoming key areas for sustainable development. Research Background and Methodology Since the introduction of the Environmental, Social, and Governance Reporting Guide in 2013, the Hong Kong Stock Exchange has continuously reviewed its ESG framework and rules, encouraging issuers to make high-quality disclosures on ESG matters and promoting the progress of listed companies in ESG and sustainable development. In April 2024, the Stock Exchange published a consultation conclusion on "Enhancing Climate-related Disclosure within the ESG Framework" to prepare listed companies for climate-related disclosure requirements based on the International Sustainability Standards Board (ISSB) climate guidelines. Combining the ESG Reporting Guide, climate disclosure consultation conclusions, Implementation Guidelines for Climate-related Disclosure within the ESG Framework, and other ESG-related documents, PwC conducted in-depth research on ESG reports of Hong Kong-listed companies for the 2023 fiscal year, categorized by the 12 primary industries of the Hang Seng Industry Classification System. The sample companies' listing time and index distribution are as follows: Distribution of Listing Time of Sample Companies for this Research Proportion of Hang Seng Index Constituents in the Sample for this Research * Based on the listed companies researched in the current year, "sample companies" in the following text also refers to this range. Annual Report Themes Based on this year's research results, PwC observed three trends in ESG disclosure and management by Hong Kong-listed companies: Theme 1: Continuously improving disclosure quality, moving towards a mature era of reporting For the 2023 fiscal year, Hong Kong-listed companies made significant progress in ESG disclosure. Overall, the proportion of mature class indicators with a disclosure rate greater than 80% reached 93.0%, a 14.1% increase from 2022. Disclosure rates have significantly increased in key areas such as board oversight of ESG matters, climate change, and supply chain ESG management. The comprehensive optimization and overall improvement in ESG information disclosure quality not only contribute to enhancing the transparency and accountability of listed companies but also provide more information about companies' sustainability performance to investors and other stakeholders. Trend in ESG Issue Disclosure for the 2020-2023 Fiscal Years Mature Class: Disclosure rate >80%, covering issues related to daily business operations, low disclosure difficulty, with the majority of companies already meeting compliance disclosure requirements and entering the optimization management stage. Growth Class: Disclosure rate 50%-80%, in relatively emerging but increasingly focused areas, such as climate change policies/environmental target setting/supply chain ESG management, with disclosure rates steadily increasing in the past two years. Lagging Class: Disclosure rate <50%, with the increasing emphasis of listed companies on ESG governance since 2022, all disclosure rates for issues have exceeded 50%, with no issues falling into the lagging class. Theme 2: Actively addressing climate challenges, climate disclosure gradually improving By 2025, Hong Kong-listed companies will officially enter the era of mandatory climate information disclosure. The consultation conclusion released by the Stock Exchange in April 2024 showed that the revised ESG Code introduced new climate-related disclosure requirements in Section D, requiring companies to provide detailed climate information from the perspectives of governance, strategy, risk management, indicators, and targets. Based on the provisions of the ESG Code in the Stock Exchange's consultation conclusion, PwC conducted research on the ESG reports of sample companies for the year 2023 to understand the current status and gaps in climate information disclosure by listed companies and provide references for companies to prepare for the new climate disclosure requirements. Governance: In the 2023 fiscal year, Hong Kong-listed companies' information disclosure in the governance dimension has become more comprehensive compared to the 2022 fiscal year. Most sample companies have disclosed the board's oversight responsibility for climate-related risks and opportunities, as well as management's assessment and management of climate risks and opportunities. Strategy: 96% of sample companies have disclosed the significant climate-related risks and opportunities they face in their ESG reports, including physical risks and transition risks, with 73% of sample companies having set qualitative or quantitative greenhouse gas emission targets. Risk Management: 77% of sample companies have disclosed their processes for identifying and evaluating climate-related risks and opportunities, and their corresponding management procedures, but only half of listed companies have incorporated climate risk management into their overall risk management processes. Indicators and Targets: Most sample companies have accumulated a data foundation for Scope 1 and Scope 2 emission management and disclosure, but only 31% of sample companies disclose Scope 3 emission data."Bonjour, comment a va aujourd'hui?" "Hello, how are you today?"Currently, listed companies in Hong Kong are still in the early stages of disclosing biodiversity issues, with only a few companies starting to disclose natural-related information from the dimensions of risk, opportunities, impacts, etc. according to the TNFD framework. It is recommended that companies adopt the LEAP method proposed by TNFD, which includes positioning, assessment, analysis, and preparation stages to assess the impact and dependency on nature related to direct operations and value chains, and prioritize natural-related risks and opportunities. Through this approach, companies can better understand and address natural-related risks, seize opportunities related to natureand achieve sustainable development in strategic planning and operations. General recommendations: Expand influence, focus on leadership Align with international standards, spread Chinese influence As Hong Kong-listed companies' reporting becomes more mature, they have become pioneers in sustainable information disclosure in the Chinese market. It is advisable to further align with high standards of international ISSB, etc., and demonstrate the advanced level and influence of Chinese companies in sustainable information disclosure field. Focus on leading topics, strengthen responsibility While paying attention to global sustainable development trends, closely follow and actively participate in discussions and actions on global leading topics such as biodiversity conservation. By actively disclosing relevant information, strengthen internal management and supervision. Internalize management, empower digitally Strengthen risk management systems to ensure robust and effective ESG governance Companies should promptly follow up on changes in ESG regulatory requirements, identify and improve internal blind spots, integrate ESG risks into the risk management framework, implement regular monitoring and evaluation, and seek third-party certification to enhance the quality and credibility of ESG disclosures. Digitalize management, support ESG decisions In the context of digital development, companies should use digital tools to simplify data collection, enhance management disclosure capabilities, conduct data analysis, monitor trends, support ESG report accuracy and decision-making. Green transformation, collaborative momentum Seize green transformation, implement ESG concepts In the macro background where promoting green and low-carbon transformation has become a national strategy, focusing on long-term sustainable development, comprehensively implementing ESG concepts, promoting the new leap of social productivity is the mission given to listed companies by the times. Development of new quality productivity, promote collaborative momentum Companies should deeply understand the characteristics of new quality productivity, explore green and low-carbon transformation paths, empower traditional industries with technological advantages, promote green lifestylestarting from the "new", based on "quality", with "productivity" as the foundation, promote high-quality development and collaborative momentum.