Issuers and funds are faced with increasingly complex ESG disclosure requirements. On 28 July 2022, The Monetary Authority of Singapore (MAS), the nation’s central bank, introduced disclosure and reporting requirements for environmental, social, and governance (ESG) funds which will enter into force on 1 January 2023. The Hong Kong Stock Exchange (HKEX), through its listing rules Main Board Appendix 27 and GEM Appendix 20, define the ESG disclosure obligations and reporting framework for listed issuers.
However, the reporting requirements and structure vary between industries as different business natures and models will have different ESG issues – this is why companies must conduct a materiality assessment before setting their reporting objectives.
Materiality assessment is the process of engaging stakeholders to find out how important specific environmental, social and governance (ESG) issues are to them. The findings gained from the assessment can then be used to guide a company’s ESG strategy and communication.
Materiality also reflects the type of ESG issues that have a significant impact on a company’s financial and operating performance.
For example, water scarcity is a significant issue for beverage companies as they rely on water to produce all of their products.
According to the SASB (https://www.sasb.org/), transportation, extractives and mineral processing, and food and beverages have the most environmental issues among all industries:
| Industries | Environmental Issue |
| Transportation | 7 |
| Extractives and Mineral processing | 7 |
| Food and Beverage | 6 |
| Infrastructure | 6 |
| Renewable Resources and Alternative Energy | 5 |
| Technology and Communication | 5 |
| Resource Transformation | 5 |
| Services | 3 |
| Healthcare | 3 |
| Consumer Goods | 3 |
Key environmental issues these industries face include GHG emissions, air quality, energy management, water management, waste, and hazardous materials management, and ecological impacts. The transportation industry is a major consumer of oil, gas, and water whilst polluting the air. Extractives and mineral processing not only directly remove natural resources from the Earth but also consume significant energy to produce metals and construction materials.
To minimize supply-chain issues and business disruption, companies have begun factoring in ESG materiality as part of their risk management framework. Incorporating materiality into company disclosures demonstrates a thorough understanding of priority ESG issues.
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