Report on the Application of ISSB Standards in Hong Kong
IFRS releases report on the application of ISSB standards in Hong Kong, aimed at summarizing the development of sustainable disclosure regulatory policies and standards in Hong Kong.
IFRS has previously released guidelines for the application of ISSB standards in jurisdictions and conducted surveys to understand the application of ISSB standards in these jurisdictions. The series of reports released by IFRS includes 33 jurisdictions.
Related Post: ISSB Releases Preview of the Inaugural Jurisdictional Guide for the Adoption of ISSB Standards
Supervision of ISSB Standards in Hong Kong
In October 2023, Hong Kong announced that it would collaborate with financial regulatory agencies and stakeholders to develop a sustainable roadmap for the appropriate adoption of ISSB standards. In October 2024, Hong Kong announced the launch of a roadmap for the full adoption of ISSB standards, which will be officially released in December 2024. The Roadmap on Sustainability Disclosure requires large public enterprises to apply ISSB standards no later than 2028.
The Hong Kong Exchanges and Clearing Limited (HKEX) has formulated climate related information disclosure requirements that comply with IFRS S2 based on the framework of listing rules, which officially comes into effect in January 2025, and Hong Kong listed companies will disclose climate information in stages. The Hong Kong Institute of Certified Public Accountants (HKICPA) has developed Hong Kong Financial Reporting Standards (HKFRS Sustainability Disclosure Standards) that comply with ISSB standards, and it will officially come into effect in August 2025. Companies can voluntarily apply this standard.
Based on the above regulatory policies, all Hong Kong listed companies are required to disclose Scope 1 and Scope 2 greenhouse gas emissions in the fiscal year starting from 2025. All companies listed on the main board are required to disclose climate information in the fiscal year starting from 2025, following the principle of ‘comply or explain’. Large, listed companies (constituents of the Hang Seng Composite Large Cap Index) are required to disclose climate information in the fiscal year starting from 2026, while small and medium-sized listed companies can voluntarily disclose climate information in the fiscal year starting from 2025 (but are required to disclose Scope 1 and Scope 2 greenhouse gas emissions).
Development of ISSB Standards in Hong Kong
Hong Kong mainly refers to IFRS S1 and IFRS S2 to develop sustainable disclosure standards. For example, the Hong Kong Stock Exchange’s climate disclosure requirements are based on IFRS S2, and listed companies writing sustainable disclosure reports based on both IFRS S1 and IFRS S2 also comply with climate disclosure requirements. The HKFRS S1 and HKFRS S2 developed by the Hong Kong Institute of Certified Public Accountants will be fully consistent with IFRS S1 and IFRS S2.
The Hong Kong Stock Exchange believes that companies need to disclose climate related risks and opportunities that may affect their cash flow, financing channels, or funding costs in the short, medium, or long term, and can include these disclosures in their general financial reports or write a separate sustainability report (however, the release time of the sustainability report needs to be synchronized with the annual financial report).
The sustainable disclosure standards established in Hong Kong do not include exemption clauses, but listed companies can apply other international sustainability reporting standards while complying with the ISSB standards, if the information required to be disclosed by the standards is equivalent to the requirements of the Hong Kong Stock Exchange’s ESG Code. Companies can also demonstrate that they comply with both ISSB and HKFRS standards.
The Hong Kong Stock Exchange does not require listed companies to make compliance statements regarding climate disclosure, but the application of HKFRS standards requires compliance statements. Currently, Hong Kong does not require third-party verification for climate and sustainability disclosures, but the Hong Kong Stock Exchange plans to consider requiring listed companies to provide mandatory verification for all or part of their sustainability disclosures by 2027.
Reference:
IFRS Foundation Publishes Jurisdictional Profiles of ISSB Standards
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