Hong Kong Releases Sustainability, Climate Reporting Standards

In a significant move towards enhancing corporate transparency and sustainability, the Hong Kong Institute of Certified Public Accountants (HKICPA) has announced the publication of new sustainability and climate-related reporting standards. These standards, known as HKFRS S1 and S2, align with the International Sustainability Standards Board’s (ISSB) benchmarks, marking a pivotal step in Hong Kong’s sustainability journey.

The new standards, HKFRS S1 General Requirements for Disclosure of Sustainability-related Financial Information, and HKFRS S2 Climate-related Disclosures, are designed to provide a robust framework for corporate disclosure requirements in Hong Kong. This alignment with ISSB standards ensures that Hong Kong remains competitive in the international capital markets by maintaining consistency and comparability in corporate sustainability reports.

The announcement follows the Hong Kong government’s release of its Roadmap on Sustainability Disclosure earlier this month. This roadmap outlines the detailed plans for implementing sustainability reporting requirements for companies. According to 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 starting in 2025. Large cap issuers will transition to mandatory reporting in 2026, and by 2028, all listed publicly accountable entities (PAEs) and significant financial institutions will be required to comply with the new standards.

The HKICPA, tasked with drafting the standards underlying these new reporting requirements, published its initial exposure drafts for HKFRS S1 and S2 in September. The decision to fully converge these standards with IFRS S1 and S2 came after extensive engagements with stakeholders. The HKICPA noted that more than 90% of respondents to its consultation supported full alignment with the ISSB standards. This overwhelming support underscores the importance of global consistency in sustainability reporting.

Hong Kong Releases Sustainability, Climate Reporting Standards

Edward Au, President of the HKICPA, emphasized the significance of this development, stating, “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 ISSB Standards, and this is critical to maintaining and enhancing Hong Kong’s competitiveness in international capital markets.”

To ensure the successful implementation of these standards, the HKICPA has outlined a series of actions aimed at supporting stakeholders. These initiatives include issuing a series of FAQs, launching an implementation support platform for stakeholders to submit technical questions, establishing a Sustainability Capacity Building Framework, and creating a Sustainability Community to facilitate exchanges and information sharing among industry participants. Additionally, the HKICPA is committed to enhancing the skills and competencies of local stakeholders for sustainability reporting.

The alignment with ISSB standards is seen as a crucial factor in maintaining Hong Kong’s competitiveness in the global market. By adopting these internationally recognized standards, Hong Kong aims to bolster the connection of global capital with local businesses, as well as those in Mainland China and other regions. This move is expected to attract more international investors who are increasingly prioritizing sustainability in their investment decisions.$

The HKICPA’s efforts in capacity building are particularly noteworthy. The organization plans to dedicate significant resources in the coming year to ensure that all stakeholders are well-prepared for the new reporting requirements. This includes providing comprehensive training and resources to help companies understand and implement the standards effectively. The establishment of a Sustainability Capacity Building Framework and a Sustainability Community will play a vital role in this process, offering platforms for continuous learning and collaboration.

In addition to these initiatives, the HKICPA will also focus on enhancing the technical skills of professionals involved in sustainability reporting. This will involve specialized training programs and workshops designed to equip professionals with the necessary knowledge and skills to meet the new reporting standards. By investing in capacity building, the HKICPA aims to ensure that Hong Kong’s corporate sector is well-equipped to meet the challenges and opportunities presented by the new sustainability and climate-related reporting standards.

The introduction of HKFRS S1 and S2 represents a significant step forward in Hong Kong’s sustainability journey. These standards not only enhance corporate transparency but also align Hong Kong with global best practices in sustainability reporting. As the world increasingly focuses on sustainability, the adoption of these standards positions Hong Kong as a leader in corporate sustainability and climate-related disclosures.

Moreover, the HKICPA’s proactive approach in supporting stakeholders through comprehensive capacity-building initiatives demonstrates a strong commitment to ensuring the successful implementation of the new standards. This holistic approach, combining robust standards with extensive support and training, sets a strong foundation for the future of sustainability reporting in Hong Kong.

In conclusion, the publication of HKFRS S1 and S2 by the HKICPA marks a significant milestone in Hong Kong’s sustainability development. By aligning with ISSB standards, Hong Kong is taking a crucial step towards enhancing corporate transparency and maintaining its competitiveness in the international capital markets. The comprehensive support and capacity-building initiatives planned by the HKICPA will play a vital role in ensuring the successful implementation of these standards, paving the way for a more sustainable future.

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