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| 8 minutes read

The Hong Kong Stock Exchange publishes consultation on mandatory climate-related corporate disclosure requirements

On 14 April 2023, the Hong Kong Stock Exchange (the Exchange) published a consultation paper seeking market feedback on proposals to enhance climate-related disclosures under the environmental, social and governance (ESG) framework.

In a nutshell - the consultation proposes to mandate all issuers to make climate-related disclosures in their annual ESG reports, essentially upgrading the current “comply or explain” requirement to a mandatory climate-related disclosure requirement and lifting the bar to align with the International Sustainability Standards Board (ISSB) climate disclosure standards. This development is in line with the general regulatory trend seen in other markets towards increased transparency and making the disclosure of climate and other sustainability issues mandatory. It is reported that the proposal would make Hong Kong SAR one of the world’s first exchanges to try to align compulsory disclosures with the ISSB standards.

Before we look at the proposals, it is worth bearing in mind that the “name of the game” behind all the developing disclosure regimes is the same: to provide investors and other stakeholders with data that is clear, reliable, relevant and comparable. The main driver behind these disclosure requirements is to enable investors to re-allocate capital to the net zero transition and to economic activities that are more sustainable in the wider sense of the word (not just those with a lower carbon footprint). They also enable businesses to better guard themselves against allegations of greenwashing.

Under the Exchange’s proposals, issuers will have to disclose any climate-related targets they have set, and whether any climate change mitigation and adaptation efforts they undertake will change their business models and strategies. They also have to disclose the resilience of business models to climate change impacts, and provide an analysis based on different degrees of the impacts. In addition, quantitative disclosures on the current effects and a qualitative description of the future effects on their financial position, performance and cash flows will be needed. The metrics and targets requirements cover disclosures of scope 1, scope 2 and scope 3 greenhouse gas (GHG) emissions; information on any internal carbon price maintained by issuers; and how climate-related considerations are factored into executive remuneration policy.

The publication of the consultation is in line with commitment made by the Hong Kong Green and Sustainable Finance Cross-Agency Steering Group in December 2020 to mandate TCFD-aligned disclosures by 2025.

What are the new disclosure requirements being proposed?

Currently, the Main Board Listing Rules include an ESG Reporting Guide (being Appendix 27) (the ESG Rules). Main Board listed companies are required to make disclosures on a “comply or explain” basis in their ESG reports which can form part of their annual report or should be published at the same time as the annual report (see our previous blog for more information).

Under these new proposals, the ESG Rules (to be renamed the ESG Code as part of the proposed changes) will introduce a new Part D (climate-related disclosures based on the ISSB climate standards). The proposed climate-related disclosures will be categorised under four core pillars, namely “Governance”, “Strategy”, “Risk management” and “Metrics and targets”, as follows:


(a) Disclose the issuer’s governance process, controls and procedures used to monitor and manage climate-related risks and opportunities;


(b) Climate-related risks and opportunities – Disclose climate-related risks faced by and, where applicable, opportunities available to the issuer and their impact on the issuer’s business operations, business model and strategy;

(c) Transition plans – Disclose the issuer’s response to the climate-related risks and, where applicable, opportunities identified in (b) above, including:

(i) any changes to the issuer’s business model and strategy, and any adaptation and mitigation efforts undertaken to address such risks and opportunities; and

(ii) any climate-related targets the issuer has set for transition plans, and any GHG emission targets the issuer is required to meet by local legislation;

(d) Climate resilience – Disclose the resilience of the issuer’s strategy (including its business model) and operations to climate-related changes, developments or uncertainties, which shall be assessed using a method of climate-related scenario analysis that is commensurate with the issuer’s circumstances;

(e) Financial effects of climate-related risks and opportunities – Disclose the current (quantitative where material) and anticipated (qualitative) financial effects of climate-related risks and, where applicable, opportunities on the issuer’s financial position, financial performance and cash flows;

Risk Management

(f) Disclose the process the issuer used to identify, assess and manage climate-related risks and, where applicable, opportunities;

Metrics and Targets

(g) GHG emissions – Disclose scope 1, scope 2 and scope 3 emissions;

(h) Other cross-industry metrics – Disclose cross-industry metrics such as the percentage of assets or business activities (i) vulnerable to transition/physical risks or (ii) aligned with climate-related opportunities, and the amount of capital expenditure deployed towards climate-related risks and opportunities;

(i) Internal carbon price – For issuers who maintain an internal carbon price, disclose the internal carbon price and explain how it is applied in the issuer’s decision-making;

(j) Remuneration – Disclose how climate-related considerations are factored into remuneration policy;

(k) Industry-based metrics – Consider industry-based disclosure requirements prescribed under international ESG reporting frameworks and make disclosures as the issuer sees fit.

When will the new rules apply from?

The revised Listing Rules and Appendix 27 are expected to come into effect on 1 January 2024 (being the Effective Date) and apply to ESG reports in respect of financial years commencing on or after the Effective Date. Therefore, assuming an issuer has 31 December as its financial year end, the new requirement will apply to ESG reports published from 2025.

[Update: In November 2023, the Exchange announced that the implementation of the Listing Rules amendments related to climate-related disclosures will be postponed to January 2025.] 

Some key points to know about the new requirements

Interim measures and company readiness

The consultation recognises that issuers are at different stages of their ESG journeys with most issuers having just started to embark on their climate-related disclosures with reference to the TCFD. Noting the un-readiness of many issuers and the concerns expressed by issuers and market practitioners, the consultation proposes interim requirements for certain disclosures during the “Interim Period” around, for example, the financial effects of climate-related risks and opportunities, scope 3 emissions and certain cross-industry metrics. The interim measures include, for disclosure of:

  • “financial effects of climate-related risks and opportunities” – issuers may provide qualitative disclosures on current financial effects. For anticipated effects of climate-related risks and, where applicable, climate-related opportunities, issuers may disclose: (i) information, to the extent reasonably available, that may enable investors to understand the aspects of the financial statements that are most affected, and (ii) the work plan, progress and timetable for making the required disclosures.
  • “GHG emissions: scope 1, scope 2 and scope 3 emissions” – an issuer who has yet to disclose all the information in relation to scope 3 emissions should disclose (i) information, to the extent reasonably available, that may enable investors to understand the issuer’s relevant upstream and downstream activities along the value chain, and (ii) its work plan, progress and timetable for making the required disclosures.
  • “Other cross-industry metrics” – an issuer who has yet to make quantitative disclosures in respect of the metrics set out in paragraph (h) above, should disclose (i) a description of (A) the assets or business activities identified to be vulnerable to transition risks / physical risks or aligned with climate-related opportunities, or (B) the types of activities requiring capital expenditure, financing or investment towards climate-related risks and opportunities, and (ii) the work plan, progress and timetable for making the required disclosures.

This essentially allows issuers that have yet to make the required disclosure to provide qualitative disclosures, supported by a work plan, progress and timetable for full compliance. For Scope 3 emissions, companies will be allowed to state what upstream and downstream activities give rise to GHG emissions, without providing figures.

The Interim Period will be an issuer’s first two reporting years following the Effective Date (being 1 January 2024). Issuers are expected to be in full compliance with all the new climate-related disclosures in respect of financial years commencing on or after 1 January 2026 (i.e. the first ESG reports fully compliant with the new rules will be produced in 2027).

Alignment with the ISSB standards

The proposals put forward in the consultation paper are intended to prepare issuers for the climate-related reporting requirements set out by the ISSB and therefore broadly align with the ISSB standards. As a reminder, the ISSB has confirmed that it plans to issue the first set of its global sustainability disclosure standards at the end of Q2 2023, so that reporting entities can start to use them from January 2024. The ISSB climate standard builds on the principles of the TCFD recommendations. For further information on the ISSB see here, here and here.

The consultation sets out how the proposals for Hong Kong issuers deviate from the draft ISSB standards. Examples of these deviations include:

  • under the “Strategy” pillar, as not all issuers would have identified climate-related opportunities at this stage, issuers may opt to disclose effects of climate-related opportunities they may have identified. To provide more time for issuers to build models for analysing the anticipated financial impact of climate-related risks, the proposal is to only require qualitative disclosures; 
  • under the “Risk Management” pillar, (similar to “Strategy”) as not all issuers would have identified climate-related opportunities at this stage, issuers may opt to disclose the process used to identify, assess and manage climate-related opportunities;
  • under the “Metrics and Targets” pillar, acknowledging the difficulty to ascertain an internal carbon price in the absence of a mature carbon market, the proposal is not to mandate issuers to maintain an internal carbon price at this stage. On renumeration disclosures, as it might not be practical to quantify the actual percentage or amount of remuneration linked to a particular factor, the proposal is not to mandate issuers to disclose the percentage of remuneration linked to climate-related considerations. Rather, an issuer may disclose how climate-related considerations are factored into its remuneration policy; and
  • those items discussed as interim measures above.

As the final ISSB climate standard will not be released before the end of Q2 2023, the Exchange is allowing a 3-month period to respond to the consultation to allow respondents the opportunity to consider the final ISSB climate standards once they are published.

IPO readiness

Once the new rules take effect on 1 January 2024, IPO applicants are expected to disclose material ESG risks / opportunities and information in their prospectuses and have mechanisms in place that enable them to meet the Exchange’s ESG requirements upon listing. IPO applicants should therefore be mindful of the new climate-related disclosure requirements and commence necessary preparatory work to ensure compliance after listing once the new rules take effect.

What’s next?

The consultation is open for responses until 14 July 2023.

The Exchange will also be publishing further materials to assist issuers in understanding and complying with the new requirements, including “Implementation Guidance” alongside the consultation conclusions to: (a) set out principles, guidelines and illustrative examples for the implementation of the new rules; (b) refer issuers to external frameworks, tools and guidelines helpful for disclosures; and (c) set out a glossary of technical terms/acronyms commonly used in international ESG reporting frameworks.


2025 is on the horizon – listed companies who have not already done so, will be turning their focus to this additional layer of compliance requirement. Issuers will need to plan how they will transition to a lower carbon economy, and under these proposals publish those plans all of which will need considerable planning and preparation (see our webinar on how to produce accurate and robust climate transition plans).

In our ESG Summer School 2022 podcast series we explore a number of different climate change and sustainability disclosure frameworks across the globe, including a podcast where our London colleagues discuss some of the key lessons learnt from the first set of TCFD disclosures made by UK listed companies in 2022.


climate change & environment, corporates, disclosure & reporting, asia, hong kong sar, blog posts