Edward Lau, Vice President of Roma Group, continues to explain recent changes of ESG requirements.

A major amendment to the ESG reporting system concerns governance structure, where the mandatory disclosure requirement (MDR) is introduced. Within the MDR, two facets receive particular focus, namely the materiality assessment (where companies are suggested detailing the methodolgy of how they conduct their materiality assessments to determine what is important for the company), and the reporting boundary (where companies should define to what extent ESG reports should cover when subsidiaries are concerned).

Lau also raises the issue of climate change, which starts gaining attention in Hong Kong despite its being considered in foreign markets for already a few years. As adverse weather conditions, according to Lau, become more frequent, companies should in their ESG reports mention how they can ensure steady provision of products and services when natural disasters affect supply and distribution. 

As for whether independent assurance should be conducted, flexibility, Lau says, should be given, as doing so would inevitably raise a cost. An indicator for consideration would be the sector in which the company is working. For companies having a higher potential of affecting the environment, an indepedent assurance might be able to deliver confidence to the public and the investors, while companies of lower environmental impact (such as financial services) may consider not to do so.

Overall, Roma Group exerts positive comments on the changes. That the HKEX as the regulatory body of listing activities is willing to take more steps towards improved transparency and requiring better governance by companies themselves is in itself a step to be most welcomedly seen.