Hong Kong Releases Sustainability, Climate Reporting Standards
The Hong Kong Institute of Certified Public Accountants (HKICPA) announced the publication of its new sustainability- and climate-related reporting standards, providing the framework underlying Hong Kong’s upcoming new corporate disclosure requirements.
The new standards, HKFRS S1 General Requirements for Disclosure of Sustainability-related Financial Information, and HKFRS S2 Climate-related Disclosures, correspond to the IFRS Foundation’s International Sustainability Standards Board’s (ISSB) S1 (sustainability-related) and S2 (climate-related) standards, and fully align with the ISSB standards, according to the HKICPA.
The publication of the new standards follows the release earlier this month by the Hong Kong government of its Roadmap on Sustainability Disclosure, outlining the details of its plans to implement sustainability reporting requirements for companies.
Under the roadmap, all Main Board issuers will be required to begin reporting against the IFRS S2 Climate-related Disclosures on a “comply or explain” basis in 2025, with large cap issuers to begin on a mandatory basis in 2026, and the HKEX to subsequently consult on mandating sustainability reporting against the new Hong Kong Standards, with an expected date for all listed publicly accountable entities (PAEs) no later than 2028. Additionally, significant financial institutions will also be required to apply the standards by 2028.
The HKICPA, mandated with drafting the standards underlying the new reporting requirements, published its initial exposure drafts for HKFRS S1 and S2 in September, noting that it had chosen to fully converge the standards with IFRS S1 and S2 after extensive engagements with stakeholders, and stating 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.”
According to the HKICPA, more than 90% of respondents to its engagement consultation supported full alignment with the ISSB standards.
Edward Au, President of the HKICPA, said:
“The publication of the HKFRS SDS marks an important milestone in the sustainability development journey in Hong Kong. The HKFRS SDS provide a standardized framework for enhancing the consistency and comparability of corporate sustainability reports. The HKFRS SDS are fully aligned with the lSSB Standards, and this is critical to maintaining and enhancing Hong Kong’s competitiveness in international capital markets.”
Au added that the “HKICPA will dedicate its efforts in the coming year to capacity building to enable the successful implementation of HKFRS SDS,” and the organization outlined a series of actions aimed at supporting the standards’ implementation, including issuing a series of FAQs, launching an implementation support platform for stakeholders to submit technical questions for discussion, establishing a Sustainability Capacity Building Framework and a Sustainability Community to facilitate exchanges and information sharing among industry participants, and supporting enhancing skills and competencies of local stakeholders for sustainability reporting.