Chairman of the Hong Kong Securities and Futures Commission, Huang Tianyou: The enterprise valuation paradigm has changed. Integrating financial and non-financial indicators is a global trend.

Chairman of the Hong Kong Securities and Futures Commission Huang Tianyou stated in his speech at the Sustainable Disclosure Forum of the Commission that he has witnessed profound changes in the financial markets. Valuation of companies has shifted from solely focusing on financial performance to integrating financial and non-financial indicators. Globally, this shift is driven by two key forces: the increasing expectations of investors, and the evolving legal and regulatory requirements for sustainable disclosure of information (including climate risks and opportunities). He mentioned that as an international financial center, Hong Kong is committed to maintaining transparent capital markets and adhering to global standards in order to build confidence among international investors. As outlined in the "Roadmap" published by the government in December last year, Hong Kong is firmly moving towards comprehensive adoption of the International Sustainability Standards Board (ISSB) standards. Huang Tianyou stated that since the first forum, there has been a strong consensus among various parties. Now, the question is not whether to disclose or what to disclose, but why better disclosure of sustainable information is crucial. Let me share from two perspectives: one from the companies, and one from the investors. Sustainable information disclosure: A win-win for companies and investors. First, for companies: Transparent disclosure, whether financial or non-financial information, brings tangible benefits. To meet disclosure requirements, companies must have a full understanding of the increasingly complex risks facing their business, in order to formulate strategies to enhance corporate value and drive sustainable development. A robust sustainable development framework will enhance corporate resilience, strengthen risk management, optimize resource allocation, and clarify competitive positioning. There are still potentially uninsured losses from extreme weather events worth hundreds of billions. To reduce these losses and unlock financial benefits (such as reducing insurance costs), companies must actively incorporate sustainable development into their governance structures. Huang Tianyou stated that Hong Kong is currently steadily advancing the establishment of a sustainability assurance system. As listed companies are expected to obtain independent assurance on sustainability-related information, they must ensure that their governance frameworks can undergo strict management oversight and accountability to ensure high-quality information disclosure. Furthermore, for investors: As investors' understanding of the financial importance of sustainable development issues deepens, they increasingly demand information disclosure that is comparable and consistent in order to make informed decisions and accurately price assets. A recent example highlights this: the China Securities Investment Fund Industry Association called on fund managers to communicate with listed companies on corporate governance issues, emphasizing the integrity and accuracy of information disclosure, as well as fulfilling environmental and social responsibilities. In addition, with the design of ISSB standards putting investors at the core, global momentum towards their adoption is taking a big step forward. Over 30 jurisdictions (many of which are in the Asia-Pacific region, including China, Japan, South Korea, and Malaysia) are working towards adopting these standards. The Asia-Pacific region needs billions of dollars in climate transition and adaptation funding, creating huge business opportunities. To seize these opportunities, companies must use information disclosure to communicate their plans and actions to investors.