presented by : loretta fong, pwc eddie ng, kpmg date: 13

ESG Assurance Reporting in Hong Kong

Presented by : Loretta Fong, PwC

Eddie Ng, KPMG

Date: 13 January 2021

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Disclaimer

The materials of this seminar / workshop / conference / webinar are intended to

provide general information and guidance on the subject concerned. Examples and

other materials in this seminar / workshop / conference / webinar are only for

illustrative purposes and should not be relied upon for technical answers. The Hong

Kong Institute of Certified Public Accountants (The Institute), the speaker(s) and the

firm(s) that the speaker(s) is representing take no responsibility for any errors or

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the materials of this seminar / workshop / conference / webinar.

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Institute.

About the speakers

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Ms. Loretta Fong

Loretta is a Partner with PwC and the Deputy Chairman of the Institute’s Auditing and

Assurance Standards Committee. She has extensive experience in providing accounting,

audit and transaction advisory services to private and publicly listed entities in Hong Kong

and the United States. She has assisted a number of companies in completing their initial

public offerings in both Hong Kong and the United States, and led numerous substantial

transactions including acquisitions, disposals and privatisation for her clients. Loretta is a

frequent speaker at various organisations on accounting, auditing, IPOs as well as mergers

and acquisitions related topics. She has also been making use of her knowledge in driving

excellency of the accounting profession in Hong Kong and the Greater Bay Area, and in

serving the society by taking on a number of government appointments.

Ms. Eddie Ng

Eddie is a Partner with KPMG. She has worked on the development of assurance toolkits for

KPMG, including KPMG’s global methodology on International Standard on Assurance

Engagements (ISAE) 3000. Within KPMG China, she is the technical leader of assurance of

non-financial information and has hands-on experience in supporting professionals of KPMG

China on assurance matters. She is also a core member of the KPMG China’s Steering

Committee on Climate Change & Sustainability and has been helping to drive KPMG China’s

business development and tools on sustainability-related services. Since 2018, Eddie has

been a reviewer of the Sustainability and Social Responsibility Review of the HKICPA Best

Corporate Governance Awards. She is also a member of AASC’s ESG Reporting Working

Group which developed AATB 5.

Table of Content

ESG Assurance Reporting in Hong Kong

Key milestones on ESG development Loretta

Latest regulatory expectations on ESG Loretta

Key features of AATB 5 Eddie

Examples of ESG Assurance Reporting Loretta

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Key milestones on ESG

development

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Key milestones on ESG development

The ESG Journey – International, Mainland China and Hong Kong

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Key milestones on ESG development

The ESG Journey – Hong Kong

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Latest regulatory

expectations on ESG

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Latest regulatory expectations on ESG

The Hong Kong Stock Exchange – ESG Reporting Guide

Following the industry consultation by the HKEx in May 2019, the HKEx

has amended the ESG Reporting Guide (Appendix 27) and related

Listing Rules in December 2019.

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ESG Guide HKLR Appendix 27 (effective July 2020)

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Board’s responsibilities around ESGHKEx’s expectations over ESG management

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Board’s responsibilities around ESG (cont’d)HKEx’s expectations over ESG reporting

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Key features of AATB 5

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Issued in December 2020

Provide practical guidance

to practitioners

Enhance consistent

application of HKSAE 3000

(Revised) on assuring ESG

information

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Chapters 1 and 2: Introduction and Assurance framework

ESG Information

In addition to HKEX issuers,

private companies may prepare

ESG information

Practitioners should have

understanding of the HKEX ESG

Reporting Guide and applicable

ESG reporting frameworks

AATB 5 is not a substitute for reading HKSAE 3000 (Revised)

Practitioners also comply with HKSQC 1 and Code of Ethics for Professional Accountants

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Chapter 3:Special features of ESG reporting

Financial reporting ESG reporting

Uniform in nature - historical

financial information

Diverse subject matters

Mainly quantitative and historical Both qualitative and quantitative;

historical or prospective;

Generally well-recognised,

established, aligned frameworks;

Numerous frameworks that are

high-level principles only and not

aligned;

More standardised in report

format and structure

Varied format and structure

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Chapter 4:Appropriate competence and capabilities

Engagement partner is a member of a firm that applies HKSQC 1 or

equivalent standard

Engagement partner has

competence in assurance skills

and techniques, e.g.

• Application of professional skepticism

and professional judgement

• Planning and performing an

assurance engagement

• Linking the consideration of

materiality and engagement risks to

the nature, timing and extent of

procedures

• Systematic documentation practices

Engagement partner has

sufficient competence in ESG

subject matter and its

measurement and evaluation

When there is specialized

ESG subject matter

expertise, may involve a

practitioner’s expert and be

sufficiently involved in the

expert’s work

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Chapter 5:HKEX ESG Reporting Guide - Specific considerations

An issuer may obtain external assurance on all or part of its ESG

report

Assurance practitioners should agree the objective and the scope

of ESG information to be assured

The assured areas should be identifiable and capable of

consistently evaluated or measured against the suitable criteria and

evidence gathered

?

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Chapter 6: Level of assurance (1/2)

Provide an informative summary of the procedures performed in

the assurance report, and more comprehensively in the case of

limited assurance

Appendix 1 of the AATB extracts paragraphs 46L/R to 49L/R of

HKSAE 3000 differentiating procedures between limited and

reasonable assurance

What is the common practice in Hong Kong, reasonable or limited assurance?

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Exercise professional judgement in

determining the nature, timing and extent of

work in a limited assurance engagement,

e.g. there may be instances where

Trends and relationship are not observed

and therefore there is a need to perform

detailed testing instead of substantive

analytical procedures

Procedures other than testing of controls

are not sufficient and therefore there is a

need to evaluate the design,

implementation and operating

effectiveness of relevant controls

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Chapter 7:Suitable criteria

Criteria are benchmarks used by practitioners to measure or

evaluate an ESG subject matter.

What are the requirements?

Criteria are suitable: exhibit characteristics of relevance,

completeness, reliability, neutrality, understandability

Criteria are available to the intended users, e.g. included in

the ESG report or assurance report or entity’s website with

location or hyperlink clearly indicated in the assurance report

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Chapter 8:Qualitative information (1/3)

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In considering evidence obtained, consider relevant assertions, e.g.

Omission of information (failure of “completeness”)

False claims (failure of “existence” or “occurrence” assertion)

Misleading or unclear representation (failure of “presentation or

disclosure” assertion)

Bias in information so that negative aspects are omitted (failure

of a “presentation or disclosure” assertion)

Practically, practitioners can break up long pieces of text and test

separately.

mining procedures, e.g.

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Evaluate misstatements individually and in aggregate

May be possible to group the misstatements together by

particular aspects of the underlying subject matter or to

particular criteria

Consider qualitative factors, e.g.

from the perspective of intended users,

underlying cause of identified misstatements

may exhibit a trend or direction

mining procedures, e.g.

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Chapter 9:Future-oriented information

Guidance in other chapters also apply here.

Likely to be an implied assertion that the entity has the capability

to carry out the intent

Consider whether the entity has a reasonable basis to making

the assertions, e.g. by considering process, controls over

development assumptions and source data.

For forecast or projections, practitioners should

focus on whether assumptions are supported by evidence

and that the information has been prepared in accordance

with applicable criteria,

NOT determine whether the results or outcomes forecasted,

or projected will be achieved or realized.

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Chapter 10:Reporting (1/3)

Forming the assurance

conclusion

Other information

Assurance report content

Considerations when ESG

report and assurance report

are published on website

Appendix 2 contains

illustrations of assurance

reports

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Require to state compliance with

HKSQC 1 and Code of Ethics

(or equivalent standards)

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Avoid using imprecise qualifying

or limiting language (e.g. “the

engagement was performed

by reference to or based on

HKSAE 3000 (Revised)”) as it

may mislead users

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Examples of ESG

Assurance Reporting

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Examples of ESG Assurance Reporting

Audit of quantitative information – example 1

CLP Holdings Limited

The scope-in data is highlighted in the

assurance report, and the definition is

included in the appendix

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Audit of quantitative information – example 2

AIA Group Limited

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The scope-in data is highlighted with a

“√” in the report

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Audit of qualitative information – example 1

X

√

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Audit of qualitative information – example 2

X

√

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Thank You

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presented by : loretta fong, pwc eddie ng, kpmg date: 13

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