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24 March 2016 - 1

Karen Ho

Business Engagement Leader,

Climate, WWF-Hong Kong

The latest ESG Reporting Guide in the Listing Rules

24 March 2016 - 2

Environmental, Social and Governance (ESG)

Reporting Requirements

Source: ESG Analytics, http://esganalytics.com/esg-reporting-requirements/

24 March 2016 - 3

Stock Exchanges Offering Written Guidance on

Sustainability /ESG Reporting

Source: http://www.sseinitiative.org/esgap/

Exchange Market Date Released

1 Australian Securities Exchange (ASX) Australia 2011

2 BM&FBOVESPA S.A. Brazil 2012

3 TMX Group Inc. Canada 2014

4 Shanghai Stock Exchange China 2008

5 Shenzhen Stock Exchange China 2006

6 Deutsche Börse AG Germany 2013

7 Hong Kong Exchanges (HKEx) Hong Kong2012

(updated 2015)

8 BSE India Ltd India 2011

Exchange Market Date Released

9 National Stock Exchange of India India 2010

10 Bursa Malaysia Malaysia2006

(Updated 2012)

11 Philippine Stock Exchange (PSE) Philippines 2010

12 Singapore Exchange Singapore 2011

13 Johannesburg Stock Exchange (JSE) South Africa2004

(Updated 2014)

14 Stock Exchange of Thailand (SET) Thailand 2012

15 Borsa Istanbul Turkey 2015

24 March 2016 - 4

2011 2012 2013 2014 2015

An Overview of the History and

Development of ESG Reporting in Hong Kong

Dec: HKEx

published

Consultation

Paper on

ESG

Reporting

Guide

Aug: HKEx

published

Consultation

Conclusions

on ESG

Reporting

Guide

Jan: ESG

Guide came

into effect for

issuers’ 2013

reporting

year

Hong Kong

Companies

Ordinance

was revised

with sustain-

ability policy

disclosure

requirements*

Jul: HKEx

published

Consultation

Paper on

Proposed

Changes of the

ESG Reporting

Guide

Dec: HKEx

published

Consultation

Conclusions

on Review of

ESG Reporting

Guide

* According to Schedule 5 of the ordinance relating to the “Contents of Directors’ Report: Business

Review,” such report must now contain a discussion on:

i. The company’s environmental policies and performance; and

ii. The company’s compliance with the relevant laws and regulations that have a significant

impact on the company; and

iii. An account of the company’s key relationships with its employees, customers and suppliers

and others that have a significant impact on the company and on which the company’s success

depends.

** The Government launched the Carbon Footprint Repository for Listed Companies in Hong

Kong in Dec 2014.

Source: http://www.hkex.com.hk/eng/rulesreg/listrules/listsptop/esg/

24 March 2016 - 5

HKEx to Strengthen ESG Guide

in its Listing Rules

Upgrades

Listed companies will be required to state in their annual report or ESG report whether

they have complied with the “comply or explain” provisions of the ESG guide.

The general disclosure under each of the aspects of the ESG guide will be upgraded

to “comply or explain” (with their wording to be aligned with the directors’ report

requirements under the ordinance).

The key performance indicators under the “environmental” subject area will be

upgraded to “comply or explain.”

Revisions

The introductory section of the ESG guide will be revised to provide more guidance on

reporting and to be more in line with international standards.

The ESG guide will be re-arranged into two subject areas: “environmental” and

“social” (see table).

The wording of the recommended disclosure will be revised to bring it more in line

with international standards by incorporating disclosure of gender diversity.

The wording of the general disclosures will be revised to align with the directors’

report requirements under the Companies Ordinance (Cap. 622 of the Laws of HK)

24 March 2016 - 6

Re-arranging the ESG Guide into two Subject Areas:

A. Environmental and B. Social

Implementation dates:

- Upgrade of the General Disclosures will come into effect for issuers’ 2016 reporting year;

- Upgrade of the KPIs in the "Environmental" Subject Area will come into effect for issuers’

2017 reporting year.

24 March 2016 - 7

Four Principles of ESG Reporting: Materiality,

Quantitative, Balance and Consistency

Materiality – Report on ESG aspects and issues that are considered important

for reflecting the organisation’s economic, environmental and social impacts or

substantively influence the assessments and decisions of stakeholders

Quantitative - Provide measurable KPIs and targets wherever possible and

supplement them with explanatory narrative.

Balance - Ensure that the disclosure is an unbiased and inclusive account of

your ESG performances. Report both “good” and “bad” news.

Consistency - Use consistent methodologies to report on and track the trend

of your ESG data for meaningful comparisons.

24 March 2016 - 8

The amendments to the Guide and related Rules

will come into effect in two phases:

Implementation dates:

the Rule amendments and the upgrade of the General Disclosures in the

Guide from recommended to "comply or explain", as well as the revised

recommended disclosures, will be effective for issuers' financial years

commencing on or after 1 January 2016. So, for issuers with a financial year

commencing 1 January, these amendments will first affect their financial

year ending on 31 December 2016; and

the upgrade of the KPIs in the "Environmental" Subject Area of the

Guide from recommended to "comply or explain" will be effective for

issuers' financial years commencing on or after 1 January 2017. So, for

issuers with a financial year commencing 1 January, this amendment will

first affect their financial year ending on 31 December 2017.

24 March 2016 - 9

What is “Comply or Explain” Provisions?

The “comply or explain” is a regulatory approach used in the field of corporate

governance and financial supervision. Rather than setting out binding laws,

government regulators set out a code, which listed companies may either comply with,

or if they do not comply, explain publicly why they do not. Research indicates that the

“comply or explain” approach is an effective tool to encourage ESG reporting.

The “comply or explain” approach recognises that good governance cannot be

constrained by ever-increasing statutory regulations which tend towards a “one size

fits all” solution.

Sometimes, an alternative to following a provision of the code may be justified in

particular circumstances. A condition of doing so is that the reasons for it should be

explained to shareholders who may wish to discuss the position with the company and

whose voting intentions may be influenced as a result

The code requires that a company’s explanation in its annual report “should aim to

illustrate how its actual practices are both consistent with the principle to which the

particular provision relates and contribute to good governance.” The principle of

“comply or explain” means that companies are accountable to shareholders who can

exercise sanctions rather than being accountable to a regulator.

24 March 2016 - 10

The Value Driver Model: Linking Sustainability

Strategies and the Financial Performance

Source: http://www.sseinitiative.org/esgap/

WWF LCMP Overview 11

Towards a sustainable

future

VISION: Transform Hong Kong from a trading hub for unsustain-able seafood and timber products, to a regional catalyst driving sustainable sourcing/production.

ACTION: Build strong alliances with local business community to share solutions, increase market demand and penetration, influence and spread awareness and change through companies’ supply chains.

Footprint

VISION: Maintain the integrity of the East Asian-Australasian Flyway (EAAF). Establish and enhance network of sustainably managed wetlands.

ACTION: Focus on shorebird conservation, to protect Mai Po’s important position on the flyway, and to support high-level projects to guide decision-making right across the EAAF.

Regional Wetlands

VISION: Transform Hong Kong's cityscape to a low carbon existence.

ACTION: Develop business engagement tools to help business and industry in Hong Kong and the Pearl River Delta region mitigate carbon footprint and make their impact measurable and quantifiable.

Climate

VISION: Protect and recover local wildlife and their habitats.

ACTION: Urgent need to protect the biodiversity of the wetlands surrounding Deep Bay, an internationally recognized Ramsar site. Focus on creating a long-term strategic plan for the conservation and wise-use of the site.

Local Biodiversity

Central Visitor Centre Kwai Hing Office Tai Po Island House Mai Po Nature Reserve Hoi Ha Marine Life Centre Mai Po Eduction Centre

About WWF-Hong Kong Building a future in which humans live in harmony with nature

Upstream

[Suppliers]

Downstream [Consumers]

Science Based

Target Setting

More about WWF’s programmes:

http://www.wwf.org.hk/en/getinvolved/sust

ainablebusiness/

Co-Creating a Net Zero Carbon Economy

24 March 2016 - 13

Thank you

wwf.org.hk

24 March 2016 - 14