“Delivering effective corporate governance practices and ESG measures is more than a box-ticking exercise. The change needs to begin with a shift of mindset at the top of the organisations.” – SEHK, December 2021

On December 10, 2021, the Stock Exchange of Hong Kong Limited (SEHK) published the conclusions from its April 2021 consultation on amendments to the SEHK’s Corporate Governance Code (the Code) and Listing Rules intended to promote good corporate governance practices among listed companies and IPO applicants. The final amendments address a range of topics that could significantly change the way that the boards of covered entities operate, including with respect to gender diversity, ESG reporting timelines and the role that ESG plays in corporate governance structures and processes.

In this Blog Post, we highlight final amendments to the Code and the Listing Rules addressing the link between ESG and good corporate governance, ESG reporting and gender diversity at both the board and workforce levels.

ESG and Corporate Governance

In the amended Code, the SEHK will definitively state that good corporate governance requires board-level oversight of ESG issues. The following language will be added to the Code to confirm the link between these two critical concepts:

Linkage between Corporate Governance and Environmental, Social and Governance (“ESG”)

Corporate governance provides the framework within which the board forms their decisions and build their businesses. The entire board should be focusing on creating long-term sustainable growth for shareholders and delivering long-term values to all stakeholders. An effective corporate governance structure allows issuers to have a better understanding of, evaluate and manage, risks and opportunities (including environmental and social risks and opportunities). The ESG Reporting Guide set out in Appendix 27 to the Exchange Listing Rules provides a framework for issuers to, among other things, identify and consider what environmental risks and social risks may be material to them. The board should be responsible for effective governance and oversight of ESG matters, as well as assessment and management of material environmental and social risks. Issuers are required to disclose environmental and social matters in ESG reports in accordance with the ESG Reporting Guide.”

The SEHK will confirm in other amendments to the Code that ESG risks must be addressed through an entity’s risk management and internal control systems. The amended Code confirms the board is responsible for evaluating and determining the nature and extent of ESG risks and ensuring the establishment of effective risk management and internal control systems. Specifically, boards should consider the nature, extent and monitoring of ESG risks in their annual reviews and establish whistleblower and anti-corruption policies and systems.

ESG Reporting

The SEHK recognizes the critical role that ESG reporting is now playing in many investment decisions, noting that “ESG reporting has become part of the key information relied on by investors to make investment decisions about their portfolio companies. Investors are increasingly vocal in urging companies to improve the quality of ESG information.

Since July 2020, ESG reports were required to be filed within five months of the end of an issuer’s financial year. Under the amended Listing Rules, however, issuers must publish their ESG reports at the same time as their annual reports. The new publication timeline will apply for all financial years commencing on or after January 1, 2022.

Gender Diversity

The SEHK has made clear that a single-gender board is not a diverse board. Accordingly, the SEHK will prohibit single-gender boards among listed companies and IPO applicants from January 1, 2022. The following transition periods will apply:

  • existing issuers with single-gender boards will have a three-year transition period to comply (i.e., these entities must appoint a director of a different gender by December 31, 2024);
  • issuers with a commitment to diversify their board in a listing document should appoint a director of a different gender in accordance with such commitment; and
  • IPO applicants with single-gender boards must identify a director of a different gender, whose appointment will be effective upon listing, for any A1 submission filed on or after July 1, 2022.

For all financial years commencing on or after January 1, 2022, the board must also:

  • set and disclose numerical gender diversity targets at the board level;
  • disclose gender ratios in the workforce (including senior management);
  • disclose plans to achieve gender diversity in the workforce;
  • disclose mitigating factors that may make achieving gender diversity in the workforce more challenging or less relevant for the issuer; and
  • review board diversity policies on an annual basis.

The SEHK recognizes input from some consultation respondents that diversity factors other than gender should not be overlooked. In response, the SEHK notes that “Gender diversity is a good starting point before expanding to other diversity aspects as it is easily measured, more objectively quantifiable and straightforward in terms of disclosure, compliance and enforcement. Issuers are encouraged to include a broader spectrum of diversity perspectives within their policies, recruitment approach and in their corporate reporting as appropriate.


In addition to other amendments to the Code and the Listing Rules described in the consultation conclusions, the amendments discussed above will take effect on January 1, 2022, subject to relevant implementation periods and timelines.  To assist issuers and IPO applicants implementing the new requirements, the SEHK has issued a new “Corporate Governance Guide for Boards and Directors“. The SEHK encourages boards to read the new guide along with the amended Code to stimulate their thinking on how they can carry out their roles most effectively.