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Ah Tan Blog

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2022-01-19

More HK-listed companies taking the first step towards carbon reduction and carbon disclosure, but a full picture is lacking

Author: Kevin Li, Researcher, CarbonCare InnoLab
 

Over 1,700 publicly listed companies, which accounts for 15% of all listed companies around the world, are disclosing their carbon emissions.^[1]  Some of the leading global companies, including a fifth of the largest listed companies^[2] and a third of the UK’s largest companies listed in Financial Times Stock Exchange 100 Index (FTSE100),^[3] have publicly made their pledges towards net-zero emissions from their operations, as a response to the global call from the United Nations and the world leaders on tackling the imminent climate crisis.

Hong Kong as a China’s and international financial centre has been gearing up their carbon disclosure processes towards achieving net-zero. There is indeed an important tool, called the Carbon Footprint Repository for Listed Companies in Hong Kong,^[4] to demonstrate and benchmark the joint efforts by listed companies in the city’s carbon reduction, and enhance transparency required by Hong Kong Exchange. According to the latest results (as of 11 January 2022), only 70 out of the 2,538 listed companies in Hong Kong provided or updated the data of their GHG emissions. It only represents 2.8% of the total number, or 7% of the total revenue of all listed companies in Hong Kong.^[5] These companies have a total of 3.3 trillion HK-dollar of market capitalisation. In another survey by a local NGO, Green Earth,[6] only 42% of the 19 Hang Seng Index Constituents under electricity, transportation and banking sectors disclosed their carbon neutrality targets, and 21% of them disclosed a road map.

Carbon Footprint Repository under-used by listed companies

The HKSAR Environmental Protection Department developed the repository project, and commissioned Carbon Care Asia to build the website, which was then launched in December 2014. Speaking at the launch ceremony, both Mr. Wong Kam-sing, the Secretary for the Environment, and Mr. David Graham, the Chief Regulatory Officer and Head of Listing of Hong Kong Stock Exchange (HKEx), cited the importance of the repository for disclosing the companies’ carbon footprint information and sharing their successful experiences in carbon management and practices.

With the inspiration of Carbon Disclosure Project (CDP), which has pioneered the environmental disclosure by public and private sectors across the globe, the repository was a dedicated online database designed to facilitate carbon performance transparency among Hong Kong's listed companies and to encourage the private sector to escalate their efforts in carbon management and sustainability drives. In the beginning, 64 listed companies, including more than 20 top-100 companies in terms of market capitalisation in Hong Kong, audited their carbon footprints and disclosed their carbon data through the repository. In comparison, however, it only showed a slow uptake, or say 9.3% increase, in the number of the listed companies that participate in the repository over the past 7 years.

Today, among the 70 listed companies in the repository, 54.3% of them are property and construction, and consumer services and goods respectively, while the rest are from sectors including financials, industrials, utilities, information technology, materials and telecommunications sectors.^[7]

It is never too late for the rest of Hong Kong’s companies, no matter whether they are publicly traded or private, to speed up and make a frog leap in their carbon disclosure. On 14 December 2021, CarbonCare InnoLab and Carbon Care Asia jointly awarded 38 units with 54 CarbonCare Labels ranging from property management, construction, finance, fashion retail, catering and printing industries, for their achievements in carbon reduction in the past year. A survey on these awardees reflected a reality of today’s carbon disclosure, which lacks a full picture of carbon footprints of Hong Kong’s private sector. Among the awardees, 76.7% are listed companies or their subsidiaries. Only 46.7% of the awardees have published their Environmental, Social and Governance (ESG) or Sustainability Reports. And among the awarded listed companies and their subsidiaries, only 17.4% of them provided the most up-to-date emissions data, while the rest have not provided or not updated their data for years. 

Listed and Private Companies encouraged to complete the picture of disclosure

The Chief Executive of the HKSAR government has pledged to achieve net-zero by 2050, with a more detailed Climate Action Plan 2050 published on 8 October 2021. In addition, with the new trends and requirements for Environmental, Social and Governance (ESG) reporting, both the listed and private companies, no matter their sizes, should be fully equipped and prepared for carbon auditing, before making roadmaps and pledges towards net zero emissions.

Meanwhile, HKEx published its first Environmental, Social and Governance (ESG) Reporting Guide in 2012, and revised the Listing Rules and required the publication of Environmental, Social and Governance (ESG) reports by listed companies effective from January 2016. It began with a voluntary approach, and on the pathway towards a comprehensive mandatory disclosure. In July 2020, HKEx’s ESG Reporting Guide was amended to incorporate elements of the Taskforce on Climate-related Financial Disclosure (TCFD) recommendations, and launched the Guidance on Climate Disclosures in November 2021.

With all these guidance, we therefore strongly encourage

1. the listed companies with the most up-to-date ESG or Sustainability report to provide or update their emissions data to the repository
2. those companies, especially those who have started their carbon reduction plans but have not yet produced an ESG report to publish their data as well. 

Among the CarbonCare Label awardees, just to name a few, Jebsen Group and Hong Kong Jockey Club, which are non-listed companies and not bound by the regulatory reporting requirements, played a leading role in publishing their emissions data in their Sustainability Reports.

To maintain the competitiveness of Hong Kong SAR as China's and international financial centre, one of the key preconditions is a swift and bold response toward the global climate crisis. While the leading companies in the US and UK have already taken steps achieving net-zero, and China has become one of the world’s leaders in tackling carbon emissions, it is inevitable that Hong Kong should play an important role in advancing carbon disclosure of both the listed and private companies as a key step towards a robust net zero roadmap.