ESG Disclosure and Transparency: Trends Among Hong Kong Corporations
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Table of Contents
The Emergence of ESG Reporting in Hong Kong
ESG reporting in Hong Kong has its roots in the international push for corporate social responsibility, as noted by Ho, Wang, and Vitell in their 2012 study. The Hong Kong Stock Exchange (HKEx), through its Corporate Governance Code, has been a key driver in promoting ESG reporting among listed companies. As a result, Hong Kong has emerged as a leader in ESG reporting among small- and mid-cap companies.
Determinants of ESG Disclosure
The determinants of ESG disclosure among firms in Hong Kong vary. However, the latest guidelines from HKEx have spurred an upward trend in ESG disclosures. Even though there are criticisms about the transparency of their methodology, Bloomberg scores have been extensively used to gauge the ESG performance of these firms, as noted by Clarkson, Li, Richardson, and Vasvari in their 2008 study.
Disparities in ESG Reporting
While the trend of ESG reporting is generally positive, disparities exist, especially among emerging Chinese enterprises listed in Hong Kong. These companies often adopt external assurance due to the demand for transparent ESG reporting, as pointed out by Cho and Patten in their 2007 research. However, the level of disclosure varies, indicating a need for more uniform reporting standards and practices.
Accounting for Sustainability
The integration of ESG policies into corporate governance is becoming a global trend. In Asia, stock market regulation and reporting in Hong Kong and Singapore have played a crucial role in providing the necessary transparency for the market to make informed decisions, according to Prado-Lorenzo, Gallego-Alvarez, and Garcia-Sanchez in their 2009 study.
The Quality of ESG Reporting
The quality of ESG reporting, particularly the disclosure of Environmental Key Performance Indicators (KPIs), is increasingly critical for effective communication between companies and stakeholders. Enhanced corporate transparency and accountability are key to improving the quality of ESG reporting.
The Role of Independent Assurance
Independent assurance on ESG reporting is another area of focus in Hong Kong. For all listed companies in Hong Kong, ESG reporting is mandatory. This requirement has played a significant role in enhancing the transparency and reliability of Non-Financial Information (NFI) included in ESG reports.
In conclusion, the trend of ESG disclosure and transparency among Hong Kong corporations is largely positive, driven by regulatory requirements and market demand for sustainable and responsible corporate behavior. However, disparities and challenges exist that need to be addressed to ensure more uniform and high-quality ESG reporting.