ESG Consutling and Reporting
Environmental, Social, and Governance (ESG) factors have evolved from a niche concern into a core pillar of corporate strategy and regulatory compliance worldwide.
What is ESG?
- Environment (E) – Addressing resource use and climate-related challenges
- Social (S) – Managing relationships and creating value for stakeholders
- Governance (G) – Building the foundation for long‑term corporate sustainability
The Evolution of ESG:
Stage 1:
1960s–1970s: Early socially responsible investing (SRI) emerges
Stage 2:
2004–2006: UN Global Compact publishes “Who Cares Wins”, formally introducing the term ESG; the UN Principles for Responsible Investment (UNPRI) are launched, marking broad institutional investor adoption
Stage 3:
2015 onwards: The Paris Agreement and Sustainable Development Goals (SDGs) drive governments to establish mandatory disclosure standards, bringing ESG into mainstream regulatory frameworks.
ESG in Hong Kong
Hong Kong has emerged as a leading hub for sustainable finance in Asia, with multiple regulators implementing comprehensive ESG disclosure requirements across different sectors. Below is a summary of the key regulatory frameworks:
- HKEX – Listed Companies
Effective from 1 January 2025, the Hong Kong Stock Exchange (HKEX) has significantly enhanced its climate-related disclosure requirements under the ESG Reporting Code, aligning with the IFRS S2 Climate-related Disclosures standard issued by the International Sustainability Standards Board (ISSB).
The HKEX’s ESG Reporting Code requires issuers to publish an annual ESG report covering the board’s oversight of ESG issues, management approach, strategy, and progress review.
For IPO applicants, ESG disclosure requirements have expanded from 5 items to at least 30 items in the May 2025 edition of the New Listing Applicant Guide, with ESG-related disclosures now appearing across multiple prospectus chapters.
- SFC – Fund Managers
In June 2021, the Securities and Futures Commission (SFC) issued a circular (superseding the 2019 version) mandating enhanced disclosure requirements for ESG-focused funds.
Effective from 1 January 2022, fund managers of SFC-authorised ESG funds must disclose:
- The fund’s ESG focus and investment strategy
- Proportion of investments that align with the fund’s ESG focus
- Due diligence performed on the ESG attributes of underlying assets
- Sources and processing of ESG data
- Regular reporting on how ESG goals have been achieved
Funds that fail to comply risk being removed from the SFC’s authorised list. The fund’s name and marketing materials must be accurate and not misleading, proportionately reflecting ESG features without overstatement.
Additionally, the SFC’s Fund Manager Code of Conduct requires all fund managers to consider climate-related risks in their investment and risk management processes. Large fund managers (with HK$8 billion or more in AUM) must make appropriate disclosures if climate risks are deemed “relevant and material”.
- MPFA – Pension Fund Managers
The Mandatory Provident Fund Schemes Authority (MPFA) has mandated 12 major fund managers to enhance ESG transparency. This applies to 47 ESG-related funds managing approximately HK$36.6 billion (US$4.71 billion) in assets.
Key requirements for pension fund managers:
- Clearly outline ESG strategies and risk management processes in investor brochures
- Measure, monitor, and report ESG performance in annual governance reports
- HKMA – Financial Institutions
The Hong Kong Monetary Authority (HKMA) introduced its “ESG Expectations” document in 2024, outlining expected ESG practices for its transaction partners and service providers, including issuers, external investment managers, and general partners. The framework focuses on climate change and transition across five pillars.
The HKMA also requires external investment managers managing Hong Kong equity and China active equity portfolios to commit to the SFC’s Principles of Responsible Ownership.
ESG Reporting Code under HKEX Listing Rules
- Implementation Timeline
The HKEX has adopted a phased approach to transition from “Comply or Explain” to Mandatory Disclosure:
Key requirements for listed companies:
Requirement | Timeline | Details |
Scope 1 & 2 GHG Emissions | Mandatory from 2025
| All issuers must disclose direct and indirect greenhouse gas emissions
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Scope 3 Emissions | “Comply or explain” from 2025; Mandatory for LargeCap from 2026
| Main Board issuers must disclose value chain emissions, including those from suppliers
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Climate-related Disclosures | “Comply or explain” from 2025; Mandatory for LargeCap from 2026
| Based on IFRS S2, covering governance, strategy, risk management, metrics and targets
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- Strategic Purpose
- Global Alignment: Direct interoperability with IFRS S2 (ISSB) to meet international investor demands.
- Accountability: Eliminating greenwashing through mandatory scenario analysis and quantified targets.
- Core Disclosure Requirements (The Four Pillars)
- Governance: Describe the Board’s oversight of climate risks and management’s role in assessing climate opportunities.
- Strategy: * Climate Scenario Analysis: (Mandatory) Assessing business resilience under different climate pathways (e.g., 1.5°C).
- Financial Impact: Quantifying how climate risks affect the balance sheet, P&L, and cash flows.
- Risk Management: Detailing the processes used to identify, assess, and integrate climate risks into the overall enterprise risk management (ERM) framework.
- Metrics & Targets: * GHG Emissions: Mandatory reporting of Scope 1, 2, and (gradually) Scope 3.
- Cross-Industry Metrics: Disclosure of transition risks, physical risks, and climate-related capital expenditure.
Before You Start
To assist your company in complying with the HKEX ESG Reporting Code and the latest climate-related disclosure requirements, we recommend preparing the following information and documentation before engaging our consulting services.
Governance Structure |
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Climate strategy and scenario analysis |
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Risk Management Framework |
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Existing ESG reports and data |
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Stakeholder and supply chain information |
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ESG Reporting Procedure
Data and document collection | Collect all relevant ESG data and supporting documentation from internal departments (such as operations, human resources, finance, and procurement) and external sources (such as suppliers and consultants). This includes energy and water usage records, emissions data, employee statistics, supplier codes of conduct, and any existing ESG policies or certifications. |
Importance assessment | Identify and prioritize the ESG issues most important to your company’s business and stakeholders. This involves reviewing industry benchmarks, regulatory requirements (such as the HKEX ESG Reporting Guidelines), and stakeholder feedback to determine which topics require disclosure. |
Gap Analysis | Compare existing data availability, policies, and disclosure practices with the Hong Kong Stock Exchange’s ESG Reporting Code (including the new climate-related disclosure requirements under Part D). Identify missing information, data quality issues, or areas where existing practices do not meet mandatory disclosure or “comply or explain” requirements. |
Data verification and calculation | Verify the accuracy and completeness of the collected data. Calculate greenhouse gas emissions using approved methods and emission factors (Categories 1 and 2, and Category 3 where applicable). Ensure that all indicators, targets, and financial impacts are correctly and consistently quantified. |
Report preparation | Prepare an ESG report in accordance with the Hong Kong Stock Exchange Listing Rules (Appendix C2). The report structure should revolve around four pillars: governance, strategy, risk management, and metrics and objectives. Provide clear, balanced, and forward-looking disclosures to comply with mandatory requirements and avoid “greenwashing.” |
Audit and verification | The draft report will undergo internal review, with key stakeholders such as the board of directors, the ESG committee, and internal audit invited to participate. If necessary, external assurance (such as limited or reasonable assurance) may be arranged to enhance the report’s credibility and investor confidence. |
Board Approval and Issuance | The final ESG report will be submitted to the Board of Directors for approval. Once approved, the report will be published on the company’s website and submitted to the Hong Kong Stock Exchange within four months after the end of the financial year (or as required by the Listing Rules). |
Data and document collection | Collect all relevant ESG data and supporting documentation from internal departments (such as operations, human resources, finance, and procurement) and external sources (such as suppliers and consultants). This includes energy and water usage records, emissions data, employee statistics, supplier codes of conduct, and any existing ESG policies or certifications. |
What ComplianceOne can do for you
ComplianceOne provides comprehensive consulting assistance, guiding you through every stage of the reporting process:
Our Team:
Our team is an independent professional consulting and advisory firm specialising in risk consulting, environmental, social and governance (ESG) advisory, as well as valuation and financial advisory services.
Our management team and project members come from highly diverse backgrounds, having worked with internationally renowned consulting firms and accounting practices. They hold various professional qualifications, including Certified Public Accountant (CPA), the CFA Institute Certificate in ESG Investing, and the Chartered Financial Analyst (CFA) designation.
We are committed to leveraging the synergies generated across our business units to deliver optimal solutions for complex business challenges.
Scope of Service
ComplianceOne provides comprehensive consulting assistance, guiding your company through every stage of reporting process
ESG Report | We assist in preparing ESG reports that comply with the HKEX ESG Reporting Code (Appendix 27*), covering all mandatory disclosure requirements under Part B, Part C, and the new Part D climate-related disclosures. Our services include data collection, emissions calculation, gap analysis, and report writing – ensuring your disclosures are accurate, complete, and in line with international standards, including IFRS S2. |
| We assist you in developing a long-term ESG strategy that integrates sustainability into your core business model. This includes defining your ESG vision and mission, setting measurable targets (including science-based reduction targets), identifying key performance indicators (KPIs), and establishing a governance structure to oversee implementation. Our strategic advisory services ensure that your ESG investments not only meet regulatory expectations but also create substantial business value. |
| We provide end-to-end climate consulting services, including:
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| We advise major institutions, including MSCI, Sustainalytics, S&P Global (CSA), and CDP, on improving their ESG ratings. Our services include:
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| We assist you in organizing and certifying carbon neutral events, including large conferences, annual general meetings (AGMs), investor days, and company celebrations. Our services include:
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