New climate disclosure requirements for Hong Kong-listed companies: top tips for how issuers can adapt

Last Friday (19 April 2024), the Hong Kong Stock Exchange (‘HKSE’) published consultation conclusions:

• to bring in new climate-related disclosure requirements (‘New Climate Requirements’) to enhance climate-related disclosures under its environmental, social and governance (ESG) framework;
• to align more closely with the IFRS S2; and
• to take into account the Hong Kong Government’s vision and approach towards developing a comprehensive ecosystem for sustainability disclosure in Hong Kong.

HKSE has received broad based market support to enhance listed issuers’ climate-related disclosure and the New Climate Requirements will become effective from the 2025 reporting year in phases.

This is an exciting development that places HKSE among the world’s first stock exchanges to enhance climate-related disclosure requirements based on IFRS S2. For details of the new requirements, see our client briefing. This blogpost sets out our top tips to help Hong Kong’s listed companies adapt to the new requirements.

Top tips for Hong Kong-listed companies

1. DO a gap analysis of your listed issuer’s sustainability disclosure to know what gaps you need to plug to satisfy the New Climate Requirements.
2. ASSESS your internal governance and risk management process, controls and procedures to make sure they are sufficient to allow your listed issuer and its board and committees to assess, report, monitor and manage climate-related risks and opportunities.
3. USE the New Climate Requirements as a fresh opportunity for your listed issuer to review its existing ESG disclosure. This process is to ensure that not only are the disclosures up-to-date, but greenwashing-free and represent your company’s best narrative in terms of business strategy, progress and challenges to help with your own climate-related targets, opportunities and risks and sustainability goals.
4. START planning for scope 3 GHG emissions disclosure even if you are not a LargeCap issuer, as the direction of travel is very clear. Even if your listed company is on a “comply or explain” regime or will enjoy implementation reliefs, you are encouraged to provide information on the work plan, progress and timetable for making the required disclosure.
5. USE the New Climate Requirements as an excellent opportunity to edit, amend, rewrite and write your sustainability-related disclosure and to make them more stakeholders-focused and in particular investors-focused and user-friendly.
6. REMEMBER to reduce duplicative disclosures. The establishment of the International Sustainability Standards Board ('ISSB') is in part to reduce the alphabet soup of sustainability reporting and to remove duplicative disclosures.  HKSE has clarified that where an issuer manages its ESG-related (including climate-related) risks and opportunities on an integrated basis, which should normally be the case, it should provide one set of integrated governance disclosures that complies with the disclosure requirements under both paragraphs 13 and 19 of the ESG Code.
7. DON’T FORGET to start thinking of integrating sustainability reporting with financial reporting.  The consultation conclusions make it clear that issuers are encouraged to follow the ISSB Standards and align the scope of entities or operations that are included in the ESG report (including the climate-related disclosures) with that of its financial statements. This may facilitate issuers’ future reporting under the HK Standards, which are expected to align with the ISSB Standards.
8. CONSIDER using the ISSB Standards on a voluntary basis as HKSE has made it very clear that the New Climate Requirements are, in the words of Ms. Julia Leung, CEO of Hong Kong's Securities and Futures Commission, “a head-start in speaking the common international language of the ISSB to the investing public and capital markets”.

Our teams would be more than happy to assist you on your journey with sustainability reporting and discuss any aspects of our top tips (or our earlier client briefing) with you. Please feel free to contact your usual Freshfields contact if you have any questions.