Companies adapt to new HKEX climate disclosures

Enhanced transparency and strategic adjustments drive corporate responses to the amended ESG Framework at the Hong Kong Stock Exchange.

Starting next year, the Hong Kong Stock Exchange (HKEX) is enforcing amended ESG Framework requirements that mandate additional climate-related disclosures. This regulatory update is poised to reshape corporate strategies and operational paradigms, focusing on sustainability and climate resilience.

Ricky Cheng, Director and Head of Risk Advisory at BDO, said that the new disclosure requirements actually have a significant impact on a company's business operation, including the transparency, strategy formulations, secure sustainable investments, and also talent management's transparency.

These requirements compel companies to disclose their governance and risk management strategies concerning carbon emissions, climate-related risks, and sustainability efforts. Furthermore, businesses are expected to evaluate how these factors influence their business models and value chains. 

"The companies may need to formulate their climate resilience strategies to reduce the carbon emissions, to manage the risks and opportunities and also to build a sustainable business model," Cheng added.

Transitioning to a low-carbon economy is no small feat. It necessitates substantial investments in renewable energy, improvements in energy efficiency, and research into new production technologies. Talent management also becomes crucial as companies must adapt their workforce and expertise to support new business models and sustainability goals.

Cheng noted, "We're seeing companies make adjustments in response to these new disclosure requirements in a number of ways." This includes conducting risk assessments to identify potential fiscal and transitional risks, like extreme weather events and changing policies.

Some companies are advancing beyond basic compliance by engaging in climate scenario analysis, establishing inventories for greenhouse gas emissions, and enhancing supply chain management to mitigate climate risks. 

"Some companies have already started to engage with suppliers in order to mitigate and identify climate risks, emissions throughout the value chains," he stated, emphasising responsible procurement and the identification of low-carbon raw material alternatives.