Hong Kong Stock Exchange sets board diversity guidance

Trading venue hopes to foster better representation for minorities with new rules

Companies that want to list on the Hong Kong Stock Exchange will be asked to explain why they lack diversity on the board.

The exchange said it has revised guidance letter GL86-16 “to require additional disclosure on policy of board diversity”, to include gender.

If a company planning an IPO has a single gender board, management should explain how and when gender diversity of the board will be achieved after listing, according to the HKEx.

Other listing applicant disclosures include “measurable objectives it has set for implementing gender diversity” and “measures the applicant has adopted to develop a pipeline of potential successors to the board that could ensure gender diversity of the board.

“Board diversity promotes effective decision-making and enhances corporate governance,” said David Graham, head of listing, in a statement.

“The consideration of diversity is becoming an increasingly important factor when investors make their investment decisions.”

The HKEx also intends to update its ESG reporting guide. In its latest consultation, officials proposed certain mandatory ESG disclosure requirements.

They include a board report on ESG issues, disclosure of climate-related issues that have an impact on the company and requiring key performance indicators (KPIs) to disclose specific environmental targets and social KPIs to “comply or explain”.

In another ESG regulatory development, the Securities and Futures Commission in April said funds with ESG mandates are required to show how they include environment, social and governance factors in the investment approach.

The move is an attempt to promote transparency in order to address superficial ESG claims (greenwashing).

The SFC said it intends to set up a webpage this year that will provide access to a central database of compliant green or ESG funds.