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?
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Environment (E) – Addressing resource use and climate-related challenges
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Social (S) – Managing relationships and creating value for stakeholders
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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:
1. 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.
2. 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".
3. 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
4. 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.
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1. Implementation Timeline
The HKEX has adopted a phased approach to transition from "Comply or Explain" to Mandatory Disclosure:
Key requirements for listed companies:
Requirement(要求) | Timeline(時間表) | Details(詳情) |
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氣候相關披露 | 2025 年起「不遵守就解釋」；2026 年起大型股發行人強制執行 | 基於 IFRS S2 標準，涵蓋治理、策略、風險管理、指標及目標。 |
範疇 3 排放 | 2025 年起「不遵守就解釋」；2026 年起大型股發行人強制執行 | 主板發行人必須披露價值鏈 排放，包括來自供應商的排放。 |
範疇 1 及 2 溫室氣體排放 | 2025 年起強制執行 | 所有發行人必須披露直接及間接溫室氣體排放。 |
2. Strategic Purpose
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Global Alignment: Direct interoperability with IFRS S2 (ISSB) to meet international investor demands.
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Accountability: Eliminating greenwashing through mandatory scenario analysis and quantified targets.
3. Core Disclosure Requirements (The Four Pillars)
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Governance: Describe the Board’s oversight of climate risks and management’s role in assessing climate opportunities.
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Strategy: * Climate Scenario Analysis: (Mandatory) Assessing business resilience under different climate pathways (e.g., 1.5°C).
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Financial Impact: Quantifying how climate risks affect the balance sheet, P&L, and cash flows.
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Risk Management: Detailing the processes used to identify, assess, and integrate climate risks into the overall enterprise risk management (ERM) framework.
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Metrics & Targets: * GHG Emissions: Mandatory reporting of Scope 1, 2, and (gradually) Scope 3.
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Cross-Industry Metrics: Disclosure of transition risks, physical risks, and climate-related capital expenditure.
ESG Reporting Code under HKEX Listing Rules
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.
1.Governance Structure
➤ ESG management approach, strategies and procedures of the Group
➤ ESG action plan and initiatives of the Group
➤ ESG Governance Structure of the Group
2.Climate Strategy & Scenario Analysis
➤ ESG risk (or opportunities) management policy/approach
➤ ESG-related targets, and corresponding determination, execution and monitoring procedures of the Group
3.Risk Management Framework
➤ Risk Identification Process
➤ ESG risk register
➤ ESG risk assessment report
4.Existing ESG Reports & Data
➤ Previous ESG Reports, Internal Data Sets, Policies & Procedures, Certifications
5.Stakeholder & Supply Chain Information
➤ Key Suppliers, Supply Chain Mapping, Stakeholder Engagement
ESG Reporting Procedure
1. Data and Document Collection
Gather all relevant ESG data and supporting documents from internal departments (e.g., operations, HR, finance, procurement) and external sources (e.g., suppliers, consultants). This includes energy and water usage records, emissions data, employee statistics, supplier codes of conduct, and any existing ESG policies or certifications.
2. Materiality Assessment
Identify and prioritise the ESG issues that are most significant to your business and your stakeholders. This involves reviewing industry benchmarks, regulatory requirements (e.g., HKEX ESG Guide), and stakeholder feedback to determine which topics require disclosure.
3. Gap Analysis
Compare your current data availability, policies, and disclosure practices against the requirements of the HKEX ESG Reporting Code (including the new climate‑related disclosures under Part D). Identify missing information, data quality issues, or areas where your current practices fall short of mandatory or “comply or explain” requirements.
4. Data Checking & Calculation
Verify the accuracy and completeness of collected data. Calculate GHG emissions (Scope 1, 2, and where applicable Scope 3) using recognised methodologies and emission factors. Ensure that metrics, targets, and financial impacts are quantified correctly and consistently.
5. Reporting Drafting
Prepare the ESG report in accordance with HKEX Listing Rules (Appendix C2). Structure the report around the four pillars: Governance, Strategy, Risk Management, and Metrics & Targets. Draft clear, balanced, and forward‑looking disclosures that meet mandatory requirements and avoid greenwashing.
6. Review & Assurance
Conduct an internal review of the draft report, involving key stakeholders such as the board, ESG committee, and internal audit. If required, arrange for external assurance (e.g., limited or reasonable assurance) to enhance credibility and investor confidence.
7. Board Approval & Publication
Present the final ESG report to the board for approval. Once approved, publish the report on the company’s website and, if required, submit it to HKEX within four months of the financial year‑end (or as stipulated by the Listing Rules).
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:
✔ ESG Reporting
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 drafting — ensuring your disclosures are accurate, complete, and aligned with international standards (including IFRS S2).
✔ ESG Strategy
We help you develop 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 emissions reduction goals), identifying key performance indicators, and establishing governance structures to oversee implementation. Our strategic advisory ensures your ESG efforts create tangible business value while meeting regulatory expectations.
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Climate Solution
We provide end‑to‑end climate advisory services, including:
Climate risk and opportunity assessment
Climate scenario analysis (aligned with IFRS S2 / HKEX Part D)
GHG emissions measurement and reduction roadmap development
Transition plan design for a low‑carbon economy
Support for setting science‑based targets (SBTi)
✔ ESG Rating Advisory
We advise on improving your ESG ratings from major agencies, including MSCI, Sustainalytics, S&P Global (CSA), and CDP. Our services include:
Gap analysis against rating agency methodologies
Benchmarking against industry peers
Strategic recommendations to enhance your ESG score
Preparation of supporting documentation for rating submissions
✔ Carbon Neutral Event Management
We help you organise and certify carbon‑neutral events, including conferences, annual general meetings, investor days, and corporate celebrations. Our services cover:
Carbon footprint calculation for the event (travel, energy, materials, catering, waste)
Procurement of verified carbon offsets
Third‑party assurance and certification (e.g., PAS 2060)
Communication and reporting of carbon‑neutral status to stakeholders
External Reference
1.HKEX – Listing Rules - Appendix C2 Environmental, Social and Governance Reporting Code
https://en-rules.hkex.com.hk/rulebook/appendix-c2-environmental-social-and-governance-reporting-code-0
2.HKEX – How to Prepare an ESG Report (2020 March)
https://www.hkex.com.hk/-/media/HKEX-Market/Listing/Rules-and-Guidance/Environmental-Social-and-Governance/Exchanges-guidance-materials-on-ESG/step_by_step.pdf
3.HKEX - Implementation Guidance for Climate Disclosures under HKEX ESG reporting framework (2024 April)