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Publication
Keeping your dawn raid guidance current
Unannounced inspections or ‘dawn raids’ are used by antitrust authorities to obtain evidence when there are suspicions that individuals or businesses have infringed the antitrust rules.
Global | Publication | May 2018
On 18 May 2018, the Hong Kong Stock Exchange published its first report on the analysis of environmental, social and governance (ESG) practice disclosure (the Review Report).
The Hong Kong Stock Exchange has reviewed 400 annual reports of listed issuers having the financial year-end dates of 31 December 2016, 31 March 2017 and 30 June 2017. 61 per cent of the listed issuers under review had the ESG reports incorporated in their annual reports and 39 per cent of them had standalone ESG reports. 38 per cent of the listed issuers under review were in full compliance with the 11 aspects of the environmental and social areas (see paragraph 13 of the Review Report) subject to ESG disclosures. The Review Report refers to a few areas for further improvements, which are summarised below.
Listed issuers should consider enhancing the disclosures in their next ESG reports.
1 | ESG working group | To establish an ESG working group comprising senior management and other staff members who have sufficient ESG knowledge to conduct materiality assessments. The ESG working group should have its terms of reference and reports to the board. |
2 | ESG strategy and reporting | In the beginning of the ESG report, it should state the issuer’s or the board’s commitment to ESG and the management approach, and explain how they relate to the issuer’s business. In addition, the ESG report should include the board’s evaluation and determination of ESG risks and how it ensures that appropriate and effective ESG risk management and internal control systems are in place. |
3 | Reporting principles – Materiality | An issuer may consider certain ESG aspects being material to it. The same ESG aspects may not be considered material to other issuers. The process of stakeholder engagement is central to the assessment of materiality. Issuers should disclose in the ESG reports explaining how they have arrived at the conclusion that a particular aspect is or is not considered to be material. |
4 | Reporting principles – Quantitative and consistency | Issuers should use measurable KPIs and use consistent methodologies to allow for meaningful comparisons of ESG data over time. KPIs need to be accompanied by (1) a narrative statement, explaining its purpose and impacts, and (2) (where available) comparative data. |
5 | Reasons for non-disclosure | Failure to report the reasons for non-disclosure of a particular ESG aspect constitutes a breach of the Listing Rules. Issuers need to check if they have any such omissions in their next ESG reports. |
6 | Partial disclosure | Vague or partial disclosures are considered “non-compliant”. For example, issuers should provide sufficient information about a particular policy that they have to the extent that readers can have a better understanding of the issuers’ policy. In addition, if the ESG aspect calls for information on several areas, disclosure or reasons for non-disclosure regarding each area is required to be made in the ESG report. |
7 | Compliance with laws and regulations | Simply stating that the issuer has complied with all laws and regulations is not considered to be sufficient. The ESG report should specify the relevant laws and regulations, as well as ways in which the issuer has ensured compliance. If there are no relevant laws and regulations that have significant impact on the issuer, the reason has to be mentioned in the report to avoid breach of the Listing Rules. |
Publication
Unannounced inspections or ‘dawn raids’ are used by antitrust authorities to obtain evidence when there are suspicions that individuals or businesses have infringed the antitrust rules.
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