Hong Kong Proposes IFRS-aligned Sustainability Reporting Standards
The Hong Kong Institute of Certified Public Accountants (HKICPA) announced the publication of new exposure drafts with proposed sustainability-related and climate-related reporting standards for companies, fully aligned with the standards issued by the IFRS Foundation’s International Sustainability Standards Board (ISSB).
The HKICPA proposal aims to have the standards effective from August 2025.
The publication of the new proposals follows the release earlier this year by the Government of Hong Kong of its “vision statement on developing sustainability disclosure ecosystem in Hong Kong,” aimed at aligning local sustainability reporting requirements with international standards, and intended for entities including listed companies and regulated financial institutions such as banks, fund managers and insurance companies, along with plans to release a roadmap later this year outlining a pathway on sustainability reporting for businesses in Hong Kong.
As part of the government’s announcement, it mandated the HKICPA to develop the local sustainability reporting standards, to be aligned with the ISSB standards.
The IFRS Foundation’s International Sustainability Standards Board (ISSB) was launched in November 2021 at the COP26 climate conference, with the goal to develop IFRS Sustainability Disclosure Standards to provide investors with information about companies’ sustainability risks and opportunities. The IFRS released the inaugural general sustainability (IFRS S1) and climate (IFRS S2) reporting standards in June 2023. Following the release of the standards last year, IOSCO, the leading international policy forum and standards setter for securities regulators called on regulators to incorporate the standards into their sustainability reporting regulatory frameworks.
The HKICPA said that it has proposed to fully converge its new standards, HKFRS S1 and HKFRS S2, with IFRS S1 and IFRS S2, after considering a series of factors including extensive engagements with stakeholders and the completion of a technical feasibility study on the application of the ISSB Standards in Hong Kong in June 2024. The institute stated that it believes that the full convergence “would bolster the connection of global capital with local businesses as well as those in Mainland China and other regions.”
Roy Leung, President of the HKICPA, said:
“HKFRS S1 and S2 are crucial in aligning Hong Kong’s sustainability reporting with the global baseline. By enhancing consistency and comparability, these standards will better meet the needs of investors seeking reliable sustainability information.”
Following the release of the proposed standards, ISSB Vice Chair Jingdong Hua said:
“By proposing full alignment to ISSB Standards, investors will be best placed to compare disclosures from Hong Kong companies with their peers around the world.”
The HKICPA said that it is seeking comments on the new exposure drafts, with a public consultation remaining open until October 27.