Trucost News / 17 Jul 2015

Tougher carbon reporting requirements set to improve corporate disclosure in Hong Kong

A Trucost review of carbon disclosure on the Hong Kong stock exchange reveals only modest improvements in recent years. But reporting requirements could be about to change.

There are signs of improvement in carbon reporting by Asian companies, according to research conducted by Trucost on behalf of the British Consulate-General Hong Kong and funded by the UK Foreign and Commonwealth Office.

Carbon Matters: A Review of Listed Companies’ Carbon Disclosure and Performance in Hong Kong was commissioned to provide a clear picture of how firms are managing the risks and opportunities of climate change. Commodity price volatility, natural resource shortages and extreme weather events threaten business profitability. Investors want companies to be transparent on how they are managing these risks and progressing towards sustainable growth. The cost of carbon reporting is relatively insignificant and often outweighed by benefits such as encouraging energy efficiency.

Trucost analyzed carbon reporting and performance by 100 companies listed on the HKEx over three years from 2011 to 2013. It found that the number of companies reporting their greenhouse gas emissions increased from 15% to 19% over the period. Despite the improvement, levels of disclosure remain low compared to the worldwide carbon reporting rate of 45%.

Moreover, only two HKEx-listed companies reported data over the three-year period in line with best practice as set out in the GHG Protocol. Data from other companies required standardization by Trucost to make it comparable.

At present, carbon disclosure is voluntary for companies listed on the HKEx. In 2011, the HKEx issued guidance recommending that companies should disclose carbon emissions. On 17 July 2015, the HKEx published plans to toughen its stance by requiring listed companies to disclose carbon emissions or explain why they have not done so.1

The need for companies to reduce emissions is urgent. The research found that the environmental cost of carbon released by the 100 HKEx companies increased by 16% in 2011-13. Three quarters of companies discussed some aspect of environmental issues in their annual reports or on company websites, but none mentioned the growing risks of carbon emissions to their businesses.

The research recommends that all listed companies should measure, manage and report their carbon emissions in line with the GHG Protocol. Investors should consider carbon risks and opportunities within their investment portfolios and set an example by reporting on their own actions. Stock exchanges and regulators should support carbon reporting by setting out a longer-term phased approach to move from voluntary, through comply or explain, to mandatory disclosure.

Chaoni Huang, Trucost’s head of business development in Asia, said: “If companies and investors are to ensure future business growth, they need to develop low carbon, sustainable business models. Carbon disclosure is an essential first step that they must take to manage the risks and opportunities of climate change.”

1 HKEx’s consultation paper Review of the Environmental, Social and Governance Reporting Guide, July 2015

Further information

Download Carbon Matters: A Review of Listed Companies’ Carbon Disclosure and Performance in Hong Kong

Media contact

James Richens, Trucost, +44 (0)20 7160 9804, james.richens@trucost.com