On November 25, the Stock Exchange of Hong Kong Limited (“Exchange”) published the 2022 Analysis of ESG Practice Disclosure (“Review”). The Review analysed ESG reports for the financial year ended 30 June 2021, 31 December 2021 and 31 March 2022 published by a sample of 400 issuers (“Sample Issuers”) to assess the overall performance of the issuers in ESG reporting, which will also assist the issuers to improve their ESG information disclosure and promote the future ESG management.

The Review focuses on four aspects: board governance of ESG issues, climate change, social issues, and reporting practices, in order to respond to consideration and mitigation of significant climate change risks (“2020 Enhancements”) of the new ESG Reporting Guide (“ESG Rules”)1 revised by the Exchange in July 2020. The Exchange generally recognises the continuous progress made by issuers in ESG disclosure, but also pointed out that issuers still have deficiencies in ESG target review and climate risk disclosure, and expects issuers to continue to improve the quality of ESG reporting based on corresponding recommendations.

1 Appendix 27 (Environmental, Social and Governance Reporting Guide) of Main Board Listing Rules by the Exchange.  

Overview of the 2022 Review highlights
  • Over 95% of Sample Issuers have disclosed the board's oversight and management approach on ESG issues;
  • While a majority of Sample Issuers had disclosed ESG-related goals and targets, only around 40% of them disclosed the process and results of the progress review;
  • Over 85% of Sample Issuers disclosed new climate-related requirements, but only over one-fifth considered or referred to the Task Force on Climate-related Financial Disclosures (“TCFD”) recommendations;
  • Disclosure rates for new key performance indicators (KPIs) such as supply chain management and anti-corruption training are lower than the average disclosure rates for other Social KPIs;
  • 93% of issuers have applied the materiality principle and have significantly improved the quality of their materiality assessment disclosures;
  • 58% of Sample Issuers managed to publish their ESG reports on the same day as their annual reports and have complied with the New Publication Requirement2.

2 In December 2021, the Exchange published Conclusions on Review of the Corporate Governance Code to require issuers to, among other things, publish ESG reports at the same time as publication of annual reports (“New Publication Requirement”).

Distribution of Sample Issuers

2.Details of the Reviews

2.1 Board governance of ESG issues

Observations of the Review

Contents Disclosure Rate Observations
Board Statement 76.8%


Over 95% of issuers have disclosed their ESG governance structure or the roles and duties of designated working group or committee for ESG matters, and some have made use of flowcharts or diagrams to illustrate the corporate governance structure.

A majority of Sample Issuers had disclosed ESG-related goals and targets (including specific targets under certain environmental KPIs).



Only around 40% of Sample Issuers disclosed how the board monitors the progress of ESG-related goals and targets set (failure to comply with this requirement would constitute a breach of the Listing Rules). 

Board’s oversights of ESG Issues 97.5%
Board’s ESG management approach and strategy 95.5%
The process or approach adopted for the board’s progress review against ESG goals approx. 40%


Recommendations from Exchange

The board’s relevant processes, controls and procedures used to monitor and manage ESG matters

This may involve elaboration on:

  • relevant expertise or skills of the board, or the designated committee or management-level positions, for effective oversight on ESG matters;
  • interaction between the board and the designated committee or the management-level positions, including the frequency and form of reporting to the board;
  • frequency of the board’s discussion on ESG issues;
  • internal and external resources and expertise available for the ESG management process; and
  • alignment of ESG governance with an issuer’s business strategy.


The process or approach adopted for the board’s progress review against ESG goals

The discussion may include: 

  • measurement system or industry benchmark adopted for progress assessment;
  • process for data collection and verification; and
  • comparison with the historical data and how the baseline is selected.


The results of the review against the targets 

  • Where targets are not achieved, issuers should disclose the reasons, and the board’s discussion or assessment on what can be done to achieve the targets or whether any adjustments should be made to the targets.
  • Where the progress is satisfactory, issuers may include further information on whether the trend can be maintained or will be affected in the future.

2.2 Climate change

Observations of the Review

Contents Disclosure Rate Observations
Climate-related disclosure requirements 85.0%


A vast majority of Sample Issuers acknowledged the importance of climate-related risks and chose to make disclosures of all new climate-related requirements, including consideration of significant climate-related risks and mitigation measures; setting of certain environmental targets; and reporting on scope 1 and scope 2 greenhouse gas (“GHG”) emissions. 

Among those Sample Issuers who reported on targets pursuant to the relevant environment key performance indicators, more than two-thirds gave qualitative targets (i.e. directional, forward-looking statements).


Only about 20% of Sample Issuers considered or referred to the TCFD recommendations when making climate disclosures.

Premised on the TCFD recommendations, the International Sustainability Standards Board (“ISSB”) climate standards contemplate disclosures on scope 3 GHG emissions and climate-related scenario analysis, over a third of Sample Issuers disclosed scope 3 emissions, but less than 5% of Sample Issuers adopted climate-related scenario analysis in the Review.

Scope 1 and scope 2 emissions 93.0%
Environment key performance indicators 93.8%
TCFD recommendation adoption* approx. 20%
Scope 3 GHG emissions* approx. 33%
Climate-related scenario analysis* less than 5%

*Note: Currently not mandatory under the ESG Rules.

Recommendations from Exchange

Environmental targets

  • While targets can be numerical figures or directional, forward looking statements, issuers are encouraged to start setting quantitative targets where feasible and collecting and disclosing numerical data as soon as possible.
  • Where some metrics are considered irrelevant or immaterial, issuers should provide a detailed explanation on the analysis and make reference to the materiality assessment where relevant.

GHG emissions

  • Separately disclose scope 1 and scope 2 GHG emission;
  • issuers should start considering disclosing scope 3 GHG emission as soon as possible.

Climate-related scenario analysis

  • The climate-related scenario analysis can be used to analyse the resilience of strategy to climate change;
  • issuers need to set the scope and boundaries to confirm the scenarios and develop at least two scenarios for comparison;
  • issuers should then identify physical and transition risks parameters that are material to their operations, and collect relevant data to evaluate their impacts under different scenarios.

Climate disclosure enhancements

  • According to the development of the TCFD recommendations and ISSB standards, the Exchange is reviewing its ESG Rules with a focus on enhancing climate disclosures. Issuers should get familiar with the climate disclosure requirements under the ISSB climate standards and identify gaps in internal policies and practices, preparing for reporting under the coming new requirements.

2.3 Social issues

Observations of the Review

Contents Disclosure Rate Observations
B5.3: Practice to identify environmental and social risks along the supply chain 84.8%


  • Most of Sample Issuers have disclosed the new Social KPIs issued in 2020 (B5.3, B5.4, and B7.4). However, the reporting level of the new Social KPIs is lower than the average of other Social KPIs,


  • For B5.3: Some Sample Issuers disclosed generic practices to identify environmental and social risks along the supply chain that are not specific to their businesses.
  • For B5.4: Regarding practices to promote green procurement, while some Sample Issuers discussed the factors considered in the process, some merely stated the support for green procurement without providing further details.
  • For B7.3: While a majority of Sample Issuers provided anti-corruption training to directors and staff, the disclosures generally lacked details about the training activities.
B5.4: Green procurement 67.8%
B7.3: Anti-corruption training 84.5%
B5.3: Practice to identify environmental and social risks along the supply chain 91.1%


Recommendations from Exchange

ESG management in supply chain
  • Issuers may consider including the following in the ESG reports:
  • personnel or team that are responsible for managing supply chain sustainability and their duties;
  • process for identifying significant environmental and social risks along the supply chain, and how to assess the impact of such risks on the issuer’s business operations;
  • actions taken or to be taken to mitigate or address the environmental and social risks along the supply chain;
  • criteria for selection of suppliers, and how such factors promote green procurement; and

measures for monitoring supply chain risks and green procurement practices.Anti-corruption training

  • Issuers should include information on the scope and method of the training, the audience as well as the frequency of the training provided.

2.4 Reporting practices

Observations of the Review

Contents Disclosure Rate Observations
Materiality reporting principle 93.0%


Compared to the previous Review in 2018, issuers have a significant improvement in disclosure rate and quality of “Materiality”, “Quantitative” and “Consistency” Reporting Principles;

Almost all Sample Issuers complied with the requirements to publish ESG reports within five months after the financial year end; 58% of them managed to publish their ESG reports on the same day as their annual reports, in advance of the New Publication Requirement becoming effective.


Regarding the application of “Quantitative” Reporting Principle, where Sample Issuers disclosed numerical figures in the ESG reports, some omitted to provide information on the standards, calculation methodologies, assumptions or conversion factors used for reporting.

Quantitative reporting principle 84.3%
Consistency reporting principle 95.0%
Publication timeline of ESG reports (the same time as the annual reports) 58.0%
Independent assurance 6.7%


Recommendations from Exchange

Application of Reporting Principles

  • Issuers should disclose information on the methodologies, standards and assumptions adopted in deriving quantitative metrics and targets to comply the “Quantitative” Reporting Principle sufficiently. 

Explanation of reporting boundary

  • Depending on their business and circumstances, issuers should have their own criteria for determining the coverage of their ESG reports.
  • If there are any changes in the business and operation location, issuers should specify that in the ESG reports.

Publication timeline of ESG reports

  • ESG reports for the financial year commencing on or after 1 January 2022 should be published at the same time as the annual report. 

Independent assurance

  • Independent assurance helps enhance the credibility of ESG information and the quality of ESG reporting, issuers may choose to obtain assurance for part(s) of the ESG reports or for certain data (e.g. GHG emissions).

3.Interpretation and recommendations from KPMG

Since 2016, when the Listing Rules required all issuers to publish an annual ESG report, the Exchange has been keeping abreast of the latest ESG trends at home and abroad, and has been improving the framework and rules of the ESG Rules to ensure that issuers can meet high level of ESG standards. Compared to previous reviews, this review focuses on the core content and disclosure difficulties of issuers, and the review comments reflect three trends.

Substantive Impact Issuers are required to fully explore the substantive impact of ESG on their business strategy and operations, including how it affects organisational performance and/or stakeholders over different cycles.
Effective management Issuers are required to have an effective ESG management system in place to consider and address sustainability challenges, as well as to measure, monitor and drive continuous improvement in ESG performance.
Agile in action Issuers should proactively understand and adopt the TCFD recommendations and ISSB standards to ensure that they are prepared for future ESG regulatory requirements.


What do you need to know?

Given that most issuers are already in the 2022 financial year ESG reporting cycle, KPMG advises listed issuers to plan their ESG disclosure strategies, workflows and enhancements in advance, taking into account the Exchange's current Review report. At the same time, given that the Exchange has included ESG regulatory requirements in the listing process, Hong Kong listing applicants should also assess their ESG management status and start to establish an ESG disclosure system in advance.

For listed issuers

“More than compliance”

The Review not only highlights existing ESG regulatory priorities, but also looks ahead to the "way forward" (review of the existing ESG framework and enhancements to issuers' climate disclosure, etc.). In addition to ensuring compliance with existing requirements, issuers should:

  • proactively align with international reporting standards and frameworks and benchmark themselves against good disclosure practices;
  • use ESG disclosure internally as a management tool to drive internal improvement of ESG performance and monitoring systems;
  • use ESG reporting as an external communication tool, expand the depth and breadth of ESG reporting disclosure, and more fully demonstrate strategic thinking, social role and contribution to sustainable development.

For listing issuers

“Rome is not built in a day”

The HKEX Guidance Letter (HKEX-GL86-16) has explicitly requested listing applicants to establish ESG mechanisms in advance to enable them to comply with the ESG regulatory requirements of the Exchange upon listing. KPMG notes that the Exchange has also recently increased its focus on ESG governance, ESG objectives, climate risk and other key points of this Review in its enquiries with some applicants. Listing applicants should start at an early application stage to:

  • build ESG-related governance structures, risk management and information disclosure systems in advance to establish the foundation for ESG management; 
  • conduct management assessments and enhancements and set performance indicators for core issues such as environmental compliance, resource use, occupational safety and labour practices; 
  • prepare disclosures of "Environmental and Social Issues" in the listing document with reference to the ESG Reporting Guide and address the focus and recommendations of the Review.


What do you need to focus on?

KPMG recommends that Hong Kong listed issuers and applicants focus further on the following four areas in the preparation of ESG reports or disclosures.

Business and strategy
  • Include an overall description of the business model and value chain to supplement the other ESG report disclosures (e.g. board’s oversight of ESG, management approach on topics e.g. climate change, supply chain) which further elaborate the risks and opportunities faced by the company in relation to relevant ESG areas and the impacts of related practices of the company.
  • Describe the ESG focus areas, key practices and targets in the context of corporate strategy, vision and objectives.
ESG-related risk
  • Disclose the management systems for ESG risks, such as identification and assessment mechanism for emerging risks including ESG risks, implementation structure, risk owners and reporting lines.
  • The types of ESG-related risks identified by the issuer, their potential impact and consequences, and the specific ESG risk response measures selected and implemented by the issuer.
Goals and progress
  • Describe the scope and boundaries of the targets set, the timeline for achieving the targets, the verifiable base year data; and how performance and progress towards achieving the targets are tracked.
  • Describe how the board and management are involved in monitoring the company's ESG performance, providing adequate oversight of trends in data, and significant ESG issues to ensure meaningful and ongoing tracking of progress against ESG objectives.
Climate-related disclosure
  • Apply TCFD recommendations to business strategy and reporting as soon as possible, analyse and disclose the physical and transition risks faced by the business; and introduce scenario analysis tools to quantify the potential impacts of climate change under different scenarios.
  • Assess how significant climate-related risks and opportunities may affect the near-term financial position, financial performance and cash flows of the business, and proactively integrate climate-related risks and opportunities into the long-term strategy development and financial planning of the business.

Contact us

Wei Lin
Partner, Head of Environmental, Social and Governance
KPMG China


Anthony Ng
Partner, ESG Reporting and Assurance
KPMG China


Catherine Chung
Associate Director, ESG Reporting and Assurance
KPMG China

Patrick Chu
Partner, National Head of ESG Reporting and Assurance
KPMG China


Irene Chu
Partner, ESG Reporting and Advisory
KPMG China


Laura Yang
Associate Director, ESG Reporting and Assurance
KPMG China

Brenda Wang
Partner, ESG Reporting and Assurance
KPMG China


Eddie Ng
Partner, ESG Reporting and Assurance
KPMG China


Haoran Li
Associate Director, ESG Reporting and Assurance
KPMG China