Reinforcing Environmental and Governance Information Disclosure, Boosts Returns from Listed Companies

The Green Earth urges Listed Companies to bare their corporate responsibilities by disclosing more detailed GHG Emissions and Waste Management Data. (left: Edmond Lau, Project Officer of The Green Earth; Right: Yiki Cheng, Senior Project Officer of Carbon Care Asia)
Summary in English
As Hong Kong Exchanges and Clearing Limited (HKEX) is undergoing a public consultation to updating their environmental, social and governance reporting guide, the public is invited to express views on or before 19th July (this Friday).
The review this year focuses on 4 areas:
1. Raising the bar to catch up with international standards by 2020
2. Introducing mandatory reporting requirements
3. Asking listed companies to explain the role of the Board of Directors in supervising the ESG reporting process
4. Asking listed companies to explain reporting boundary according to the 4 reporting principles
To review the most representative ESG reports, The Green Earth (TGE) has analyzed the 50 constituents of Hang Seng Index.
TGE focuses on the disclosure performances regarding greenhouse gas emissions and waste management to grade the reports into three levels (I to III), where Level I is the best-performed group.

For GHG emissions, 24% (or 12 firms) could only align with the current HKEX disclosure requirement, which provides total GHG emissions with an emission density, so they are rated Level III.
Another 46% (23 firms) have their reports achieved Level II, they reported Scope 1 and 2 emissions. And for those who reported material scope 1, 2 and 3 emissions, align with GRI and TCFD criteria, accounted for 30% (15 firms).

For waste management data, results show a large number—34% (17 firms) just merely aligned with the current HKEX standard to provide the total hazardous and non-hazardous waste data, which is Level III. 12% or six firms took a step further and provide a total recycling rate to be Level II.
For those who are willing to let readers get a full understanding of their waste management and recycling situation, have published a breakdown of recycling materials are Level I, accounts for 34% or 17 firms.
On the other hand, there are 20% or 10 firms who did not provide any waste generation, disposal and recycling data. They were classified as “ungraded”.

TGE found that the constituents of the Hang Seng Index tend to disclose GHG emissions data better than waste management data. 76% or 38 firms reached Level I and II GHG emissions data disclosure, while only 46% or 23 firms reached Level I and II waste management data disclosure. TGE considers there are still many listed companies that can have room for improvement.
TEG welcomes the consultation paper and suggestions for improvement by HKEX, and at the same time TGE raises the following suggestions:
GHG emission control and waste management:
– Mandatory requirements in scope 1+2 GHG emissions is not enough to reflect such environmental performances of a firm. We recommend disclosing all scopes 1,2 and 3 in their ESG reports. Moreover, we suggest firms with consumer products and services as their major business to consider including carbon emissions along the whole lifecycle of the products’ or services’ lifecycle (from cradle to grave);
– Agree that firms should not only share the outcomes of certain initiatives carried out but also a holistic “reduction target” to respond to the current global challenges on climate change and waste reduction;
– About waste data, firms often disclose merely a recycling amount or a recycling rate. We urge them to show data of recycled materials being used and the reduction of using virgin materials;
– Firms with consumer products and services should disclose the use of plastic packaging and show the progress of reaching the target of zero-microplastic; and
– Provide measurable and meaningful data according to various business units of the firm. Firms of similar business should also come up with a common emission density unit for carbon emissions, waste generation, disposal and recycling so the public could easily compare their performances.
– Disclose details of consultation with stakeholders (top management, front-line staff, customers, investors) regarding ESG issues. Present the whole picture of stakeholder’s views and company’s responses and action plans; and
– Satisfy all the environmental responsibilities along the supply chain– Request suppliers, contractors and collaborating parties to provide environmental data of their supplies and services to the firm. Including carbon emission density, waste generation density and recycling rates. Listed firms should include those data into their own carbon emission schedule.
Data visualization:
– Firms should reassess their methodologies of data collection, calculation and presentation. They should describe their data boundaries in detail, with the aid of tables and charts;
– We recommend keeping all environmental data (including all data in detail and the third-party verification statement) in the ESG report. Listed companies shall facilitate the public to have easy access to data, instead of fishing in different sections of the company’s website; and
– This consultation suggests ESG reports to going paperless hereafter. TGE welcomes this suggestion and suggests putting hyperlinks at the contents and indexes for easy navigation in the report.
TGE believes in green citizen responsibilities for everyone in our community. Hong Kong is an international financial center in Asia, if listed companies do well in ESG reporting by having relevant data disclosure, it helps make the city go sustainable. TGE urges everyone to express views on or before the public consultation that ends this Friday (19th July), details refer to the link below:

Acknowledgement:We thank Carbon Care Asia Limited to be the technical consultant of this research, particularly explanations and suggestions to comprehend Standards like HKEX’s ESG Guidelines, GRI. Research data are collected and analyzed by TGE.
Researcher: Kelvin Chan, internship student from the City University of Hong Kong
Press Enquiries: Edmond Lau, Project Officer, TGE; Edwin Lau, Founder and Executive Director, TGE (Tel: 37088380)
For details of the research, refer to the full report here.