Exchange Publishes Consultation Paper on Review of Corporate Governance Code and Related Listing Rules

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  • Exchange seeks comments on proposals to enhance Corporate Governance Code
  • New proposals include new diversity requirements to end single-gender boards among listed issuers

The Stock Exchange of Hong Kong Limited (the Exchange), a wholly-owned subsidiary of Hong Kong Exchanges and Clearing Limited (HKEX), today (Friday) published a consultation paper (Consultation Paper)outlining proposed enhancements to the Corporate Governance Code and Corporate Governance Report (the Code), as well as related amendments to the Listing Rules.

The proposals include new measures aimed at further enhancing corporate governance standards among listed issuers in Hong Kong, specifically in the areas of corporate culture, director independence, diversity, and in Environmental, Social and Governance (ESG) disclosures and standards.

“At HKEX, we are committed to enhancing the quality of our market, and this consultation focuses on improving a range of corporate governance standards. Our proposals emphasise instilling change in mindset of issuer’s boards, promoting board independence, board refreshment and succession planning, as well as improving board diversity amongst Hong Kong issuers, helping to enhance Hong Kong’s position as a leading ESG hub in Asia,” said Bonnie Y Chan, HKEX’s Head of Listing.

The Exchange’s new ESG reporting requirements (effective from July 2020) have incorporated certain important elements of the Task Force on Climate-related Financial Disclosures (TCFD)Recommendations3. In late 2020, the Hong Kong Government announced its aim to achieve carbon neutrality by 2050, and the Green and Sustainable Finance Cross-Agency Steering Group4 announced the initiative towards mandatory TCFD-aligned climate-related disclosures by 2025.  The Exchange encourages issuers to adopt the TCFD Recommendations when disclosing climate change-related information under the ESG Guide, and will provide further guidance in this regard.

Governance and oversight of ESG matters and management of material ESG risks is an integral part of good corporate governance. Therefore, the Exchange is revising the Code to elaborate the linkage between corporate governance and ESG. To further facilitate issuers’ compliance with the Code and achieving high standards in corporate governance, the Code will also be re-arranged to improve the flow and readability.

The deadline for responding to the Consultation Paper is 18 June 2021.

Interested parties are encouraged to respond to the Consultation Paper by completing and submitting the questionnaire.

Notes:

  1. Disclosure on factors considered, the process and board or nomination committee’s discussion in arriving at the determination in the explanation on why such INED is still independent and should be re-elected.
  2. ESG Reporting Guide as set out in Appendix 27 to the Main Board Listing Rules and Appendix 20 to the GEM Listing Rules.
  3. For details, please refer to the TCFD website.
  4. A steering group initiated by the Hong Kong Monetary Authority and the Securities and Futures Commission with members including the Environment Bureau, the Financial Services and the Treasury Bureau, HKEX, the Insurance Authority and the Mandatory Provident Fund Schemes Authority.

Source: HKEx