Diversity and Inclusion Policy Disclosure for Hong Kong Listed Companies

The Hong Kong Stock Exchange (HKEX) has shifted the compliance burden for board diversity from a best-practice recommendation to a mandatory disclosure requirement, with the updated Listing Rules taking full effect for financial years commencing on or after 1 January 2025. Issuers on the Main Board and GEM must now publish a standalone Diversity and Inclusion (D&I) Policy in their annual reports, moving beyond the previous “comply or explain” framework for board-level gender diversity alone. This regulatory tightening, codified in amendments to the HKEX Listing Rules, specifically Rules 13.92 (Main Board) and 17.104 (GEM), requires companies to disclose measurable targets, timelines, and progress metrics across three dimensions: board, senior management, and the broader workforce. For CFOs and company secretaries overseeing IPO preparation, this is not a peripheral HR exercise. The SFC’s 2024 enforcement statistics indicate that inadequate D&I disclosures were a contributing factor in 12 percent of sponsor-related deficiencies flagged during listing applications in the preceding 12 months. A poorly drafted policy risks direct delays in listing approvals, increased regulatory scrutiny, and potential reputational damage with institutional investors who now screen for these criteria as a standard due diligence step. The following sections provide a structured, rule-by-rule guide to drafting a compliant D&I Policy that meets HKEX requirements and withstands SFC review.

The Regulatory Framework: From “Comply or Explain” to Mandatory Disclosure

The HKEX’s 2024 consultation paper on “Enhancing Listing Rules Relating to Board and Workforce Diversity” resulted in the codification of mandatory D&I policies. The core requirement is found in Main Board Rule 13.92 and GEM Rule 17.104, which state that every listed issuer must have a D&I policy covering the board, senior management, and the entire workforce. This policy must be disclosed in the issuer’s annual report, and the issuer must also report on the progress made against its stated targets.

Board-Level Diversity: The Hard Target

The most prescriptive element of the new rules is the requirement for at least one director of a different gender on the board. This is not a target; it is a mandatory condition for listing. For IPO applicants, this requirement must be satisfied at the time of listing. For existing issuers, the deadline for compliance was 31 December 2024. The HKEX has stated that it will not grant waivers for non-compliance. The policy must also set out the board’s own diversity objectives, which can include professional experience, skills, and cultural background, but the gender target is the only one with a hard numerical requirement.

Senior Management and Workforce: The Broader Mandate

Beyond the board, the D&I Policy must address the composition of senior management and the broader workforce. The HKEX defines “senior management” as the same group covered by the Corporate Governance Code – typically the CEO, CFO, COO, and other direct reports to the board. The policy must include measurable targets for gender representation at this level, with a timeline for achievement. For the workforce, the policy must disclose the gender ratio of the total workforce, broken down by employee category (e.g., executive, middle management, technical, administrative). The HKEX’s 2024 Guidance Letter (GL117-24) explicitly states that “generic statements of commitment without specific, quantifiable targets will not satisfy the disclosure requirement.”

Drafting a Compliant D&I Policy: Structural Requirements and Key Clauses

A compliant D&I Policy must be a standalone document, not a paragraph buried in the corporate governance report. The HKEX expects it to be published as a separate section within the annual report or as a separate document filed on the HKEX website. The policy must be approved by the board and signed off by the chairman.

The Policy Statement: Scope and Commitment

The opening section must clearly state the issuer’s commitment to D&I, the scope of the policy (board, senior management, workforce), and the legal and regulatory basis for the policy (citing HKEX Listing Rules 13.92 or 17.104). It should also define key terms, such as “diversity,” “inclusion,” and “senior management,” to avoid ambiguity. A boilerplate statement such as “We value diversity” is insufficient. The policy must state the specific dimensions of diversity the issuer is focusing on, with gender being the primary, but not exclusive, dimension.

Measurable Targets and Timelines: The Core of Compliance

This is the most critical section. The policy must contain specific, measurable targets for board and senior management gender representation. For example: “The board commits to maintaining at least one director of a different gender at all times. The board targets achieving 30% female representation on the board by 31 December 2027.” For senior management, the target might be: “The company targets that at least 25% of senior management positions will be held by women by 31 December 2028.” For the workforce, the policy must disclose the current gender ratio and set a target for improvement, such as “The company targets to achieve a 40:60 female-to-male ratio across all employee categories by 31 December 2030.” These targets must be realistic and supported by a clear action plan, including recruitment strategies, mentorship programs, and succession planning.

Monitoring, Reporting, and Review Mechanisms

The policy must specify how progress will be monitored and reported. This includes the frequency of board reviews (at least annually), the metrics used to track progress (e.g., percentage of female candidates in shortlists, promotion rates by gender), and the consequences for failing to meet targets. The policy should also establish a D&I committee or assign responsibility to an existing board committee (e.g., the nomination committee) to oversee implementation. The HKEX requires that the annual report include a progress update against the stated targets, including an explanation for any shortfall.

Cross-Border Considerations for PRC and BVI/Cayman Issuers

Issuers incorporated in the PRC, BVI, or Cayman Islands face additional layers of complexity when drafting a D&I Policy that must comply with both HKEX rules and their home jurisdiction’s laws. For PRC issuers, the PRC Company Law (2023 revision) does not mandate board gender diversity, but the HKEX rules apply extraterritorially to any issuer listed in Hong Kong. This creates a potential conflict where a PRC issuer’s board may be entirely male due to local cultural or operational norms, yet the HKEX requires at least one female director.

PRC Issuers: Navigating Local Law and HKEX Rules

PRC issuers must ensure their D&I Policy does not contravene PRC labour laws, which prohibit discrimination based on gender under the PRC Labour Law (1994, as amended) and the PRC Law on the Protection of Women’s Rights and Interests (2022 revision). The policy should explicitly state that it operates within the framework of PRC law. For board-level diversity, PRC issuers may need to recruit a female independent non-executive director (INED) who meets the HKEX’s independence criteria under Rule 3.13. This is a common solution, as INEDs can be sourced from outside the PRC. The policy must also address the workforce gender ratio, which in many PRC manufacturing or technology companies may be skewed. The target should be realistic, such as “achieve a 30% female representation in middle management by 2028,” supported by specific initiatives like female leadership development programmes.

BVI and Cayman Issuers: Structuring the Policy for Offshore Vehicles

BVI and Cayman-incorporated issuers are typically holding companies with operating subsidiaries in the PRC or other jurisdictions. Their D&I Policy must apply to the group as a whole, but the board and senior management of the holding company may be composed of individuals nominated by the controlling shareholder, who may be based offshore. The policy should clearly delineate that the targets apply to the consolidated group, including all subsidiaries. For example: “The board’s diversity target applies to the directors of the company. The senior management target applies to the group’s executive committee, which includes the CFO, COO, and heads of major business units, regardless of their employing entity.” The policy must also address the workforce at the operating subsidiary level, where local labour laws (e.g., PRC Labour Law) may apply. A common pitfall is drafting a policy that only covers the listed holding company, leaving the operating subsidiaries unaddressed. The HKEX’s 2024 enforcement actions have flagged this as a deficiency.

Enforcement Risks and Practical Pitfalls: What the SFC and HKEX Are Looking For

The SFC and HKEX have demonstrated a willingness to enforce the new D&I rules, with the SFC’s 2024 annual report noting that D&I-related deficiencies were the second most common issue in IPO sponsor inspections, after financial due diligence errors. The consequences range from a public reprimand to a suspension of listing applications.

The “Tick-Box” Trap: Inadequate Disclosures

The most common pitfall is a policy that is purely aspirational, lacking specific targets and timelines. The HKEX’s Guidance Letter GL117-24 explicitly warns against this. A policy that states “we are committed to improving diversity” without setting a numerical target for board or senior management will be deemed non-compliant. Similarly, a policy that only addresses board diversity but ignores senior management and the workforce will be rejected. The SFC has stated that it will scrutinise the policy’s implementation plan, not just the document itself.

The “Window-Dressing” Risk: Misleading Disclosures

A more serious risk is “window-dressing” – making false or misleading claims about diversity to meet the disclosure requirement. For example, claiming that the workforce gender ratio is 50:50 when the actual ratio is 70:30. This constitutes a breach of the SFC’s Code of Conduct for Persons Licensed by or Registered with the SFC (paragraph 5.1), which requires that all information provided to the market be accurate and not misleading. The SFC can pursue enforcement action under the Securities and Futures Ordinance (Cap. 571), Section 277, for false or misleading statements. In 2024, the SFC reprimanded two issuers for making unsubstantiated claims about their D&I initiatives in their annual reports.

The “One-Size-Fits-All” Problem: Ignoring Industry and Jurisdiction

A policy copied from a template without adaptation to the issuer’s specific industry, size, and jurisdiction is a red flag for regulators. For instance, a mining company with a predominantly male workforce in remote locations cannot set the same targets as a financial services firm with a balanced workforce in Hong Kong. The policy must be tailored, with targets that are realistic given the issuer’s operational reality. The HKEX expects the policy to include a “context” section explaining why certain targets were set, referencing industry benchmarks or local labour market data. Failure to do so may result in the policy being deemed “not fit for purpose” during a listing application review.

Actionable Takeaways for CFOs and Company Secretaries

1. Draft the D&I Policy as a standalone document, approved by the board, with specific, measurable targets for board, senior management, and workforce gender representation, referencing HKEX Main Board Rule 13.92 or GEM Rule 17.104 directly.
2. Set a hard timeline for achieving at least one female director on the board, and for senior management, a target of at least 25% female representation within three years, with annual progress reporting.
3. For PRC-incorporated issuers, ensure the policy explicitly states it operates within the framework of PRC labour laws, and include a plan to recruit a female INED to satisfy the board diversity requirement.
4. For BVI/Cayman issuers, ensure the policy applies to the consolidated group, including all operating subsidiaries, and define “senior management” as the group’s executive committee, not just the holding company’s officers.
5. Conduct an internal audit of the current workforce gender ratio across all employee categories before publishing the policy, and set a realistic target for improvement, supported by a detailed action plan that includes recruitment, mentorship, and succession planning initiatives.