HONG KONG SAR, CHINA Trends and Developments Contributed by: Vincent Lung and Mike Yeung, Parkside Chambers
as well as to exercise their rights as shareholders or creditors. In a review conducted by HKEx published in November 2024 (see 2024 Analysis of ESG Prac - tice Disclosure), the listed companies in Hong Kong scored an average of over 91% in terms of their ESG Reports compliance. Towards the end of 2024, HKEx published consulta - tion conclusions on review of the CG Code and related Listing Rules (see Review of Corporate Governance Code and Related Listing Rules). The amendments to the CG Code and the Listing Rules came into effect on 1 July 2025 (with a transition period running to 1 July 2028), and aimed to further enhance board independ - ence and effectiveness, promoting diversity within the board and workforce, strengthening risk management and internal controls and improving capital manage - ment. In practice, the updated rules, inter alia, impose restrictions on “overboarding” (ie, an INED must not concurrently hold more than 6 HK listed companies directorship and a listed company’s board must not include an INED who has served for more than nine years) and make it a requirement to conduct review and disclosure of findings of risk management and internal controls at least annually. Beginning also in operation as from 1 January 2025 was the inclusion in the ESG Reports of climate-related disclosures based on the International Sustainability Standards Board’s (established by the IFRS Foundation) climate-related disclosures (see Part D, Appendix C2 of Listing Rules). There is a sense of a shift from broad ESG narrative reporting to more specific disclosure on risk, gov - ernance, metrics and financial impact. All these are strong indicator of the continuing trend in elevating the standards on comprehensive risk management and information transparency for the betterment of internal controls and corporate governance. Facilitated by the ever-heightening standards on more specific aspects as set out above, boards of Hong Kong listed companies must take a more structured and forward-looking approach to board succession planning. Processes include sequencing INED transi - tions over multiple cycles, reassessing the mix of skills and experience required for future strategy, and where appropriate, reconfiguring roles to preserve insti - tutional knowledge while refreshing independence. Regular board performance reviews are now embed -
ded more firmly in governance practice as well. There is also an international trend of establishing a board committee responsible for sustainability in view of the ESG Reports requirement and the recognised need for managing a company’s sustainability risks. Com - panies representing two-thirds of the world’s market capitalisation have established a committee respon - sible for overseeing the management of sustainability risks and opportunities reporting directly to the board. As Hong Kong regulators are increasingly concerned with sustainability risk-related issues, boards of listed companies will inevitably have to dip into these issues when overseeing management, which in turn may encourage more boards of Hong Kong listed compa - nies to resort to the establishment of a sustainability risk board committee. Insofar as licensed corporations and financial institu - tions are concerned, the regulators (eg, the SFC and Hong Kong Monetary Authority) have always main - tained and will continue to maintain a robust approach to ensure implementation of stringent internal controls to safeguard market integrity. The regulators expect licensed corporations and financial institutions to take a proactive approach in ensuring the existence and due execution of an adequate and effective inter - nal controls system, including measures concerning aspects such as customer due diligence, record-keep - ing, reporting and trades screening, which should be reviewed periodically, and will likely scrutinise these measures in a microscopic manner. Hong Kong’s IPO market reached historic highs in 2025, reclaiming its position as one of the world’s leading venue for fund-raising activities. A defining feature of this resurgence has been the strong influx of Mainland Chinese companies seeking capital, vis - ibility and international credibility through Hong Kong. This represents a recognition of Hong Kong’s reputa - tion as a prominent financial centre built upon good corporate governance, and speaks volumes for the need for a continuing trend of corporate governance standards-raising. More importantly, this wave of list - ings, both first-time IPOs and “A+H” dual listings, often involved founder-led enterprises and hence founder-centric ownership structures, causing con - cerns on concentrated decision-making and limited exposure to independent oversight. In this light, good
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