Hong Kong SAR publishes HKFRS Sustainability Disclosure Standards

On 12 December 2024, the Hong Kong Institute of Certified Public Accountants (the HKICPA) published the HKFRS S1 General Requirements for Disclosure of Sustainability-related Financial Information and HKFRS S2 Climate-related Disclosures (the HKFRS Sustainability Disclosure Standards). The publication of the HKFRS Sustainability Disclosure Standards follows the public consultation that closed on 27 October 2024 (see our previous blog post).

The HKICPA is the sustainability reporting standard setter in Hong Kong. The HKICPA has developed the HKFRS Sustainability Disclosure Standards as a set of local sustainability disclosure standards aligned with the International Sustainability Standards Board’s - IFRS S1 General Requirements for Disclosure of Sustainability-related Financial Information and IFRS S2 Climate-related Disclosures (the ISSB Standards) (see our previous blog post). The HKICPA’s standard-setting function, among others, is overseen by the Accounting and Financial Reporting Council (AFRC).

On 10 December 2024, the Hong Kong SAR Government published the Roadmap on Sustainability Disclosures in Hong Kong which sets out the approach and proposed timeline for “publicly accountable entities” to adopt the HKFRS Sustainability Disclosure Standards (the Roadmap) (see our blog post). 

This development forms part of the Hong Kong SAR Government’s and regulators’ commitment to developing a robust sustainability disclosure ecosystem in line with international standards.

What has been published?

The HKICPA has published: 

• HKFRS S1 General Requirements for Disclosure of Sustainability-related Financial Information (the HKFRS S1); 
• HKFRS S2 Climate-related Disclosures (the HKFRS S2); and
• FAQs. 

The HKICPA also launched an implementation support platform for stakeholders to submit technical questions and has also established a Sustainability Capacity Building Framework and the Sustainability Community to support information sharing among industry.

Who will the proposed HKFRS Sustainability Disclosure Standards apply to?

As outlined in the Roadmap, Hong Kong will prioritise the application of the HKFRS Sustainability Disclosure Standards by large “publicly accountable entities” or “PAEs” under a phased approach, with the aim to fully adopt the standards by 2028. 

PAEs include listed entities and regulated financial institutions in Hong Kong such as banks, fund managers, insurance companies and MPF trustees.

Large PAEs in Hong Kong include listed companies which are Large Cap Issuers (i.e. issuers that are Hang Seng Composite LargeCap Index constituents), as well as non-listed financial institutions carrying a significant weight in Hong Kong. 

When will the proposed HKFRS Sustainability Disclosure Standards apply?

The HKFRS Sustainability Disclosure Standards have an effective date of 1 August 2025. 

Despite this effective date, as it currently stands, the HKFRS Sustainability Disclosure Standards are voluntary and will remains so unless or until there are legislative or regulatory requirements to mandate their use.

Relevant authorities and regulators (including the HKEX, HKMA, SFC, MPFA and IA) will need to conduct their own consultations to determine the approach and timing of adopting the HKFRS Sustainability Disclosure Standards.

In the interim, organisations that are required to prepare sustainability disclosures will continue to report in accordance with the rules, regulations or guidelines specified by the relevant authorities/regulators. 

Organisations may consider voluntarily preparing sustainability disclosures in accordance with the HKFRS Sustainability Disclosure Standards.

How will the HKFRS Sustainability Disclosure Standards relate to the HKEX’s climate-related disclosure requirements?

To recap - for listed entities in Hong Kong, HKEX published the new climate-related disclosure requirements in April 2024 (the HKEX New Climate Requirements) which will apply on a phased approach for financial years commencing on or after 1 January 2025. The HKEX New Climate Requirements are developed based on IFRS S2 under the “climate-first” approach. All Main Board issuers are required to disclose against the HKEX New Climate Requirements on a “comply or explain” basis starting from 1 January 2025. Large Cap Issuers are further required to disclose against the HKEX New Climate Requirements on a mandatory basis starting from 1 January 2026 (see our previous briefing). 

As set out in the Roadmap, the HKEX New Climate Requirements in the Listing Rules are intended as an interim step for companies to start climate reporting early in accordance with the ISSB Standards. 

HKEX will consult the market in 2027 (when the first mandated reports based on the HKEX New Climate Requirements become available) on mandating sustainability reporting using the HKFRS Sustainability Disclosure Standards for listed PAEs. 

The consultation will focus on the implementation of the HKFRS Sustainability Disclosure Standards for listed companies, including whether to replace the existing Listing Rule requirements in respect of ESG reporting (as set out in Appendix C2 Environmental, Social and Governance Reporting Code (Part A to Part D) of the Listing Rules) with a new provision directing listed companies to publish sustainability reports in accordance with the HKFRS Sustainability Disclosure Standards.

Subject to the consultation feedback, it is expected that the HKFRS Sustainability Disclosure Standards will apply to the first batch of listed companies in respect of reports for financial years beginning on or after 1 January 2028. Although, it is proposed that the requirement to prepare sustainability-related disclosures in accordance with the HKFRS Sustainability Disclosure Standards will be introduced in a proportionate manner and the consultation process will consider phasing-in of reporting entities, starting with more advanced issuers (e.g. Large Cap Issuers).

The consultation will also seek feedback on mandating assurance for all or part of the sustainability disclosures.

How will the HKFRS Sustainability Disclosure Standards impact financial institutions?

The expectation is that relevant financial regulators will conduct sector-specific engagements to determine the approach and timing of adopting the HKFRS Sustainability Disclosure Standards for different financial sectors. 

Subject to stakeholders’ comments and feedback, the aim is for financial institutions (being non-listed PAEs) carrying a significant weight to apply the HKFRS Sustainability Disclosure Standards no later than 2028.

Does full alignment with IFRS S1 and S2 mean the HKFRS Sustainability Disclosure Standards will fully align with all future ISSB Standards?

It is explained that “full alignment” relates to IFRS S1 and S2 only and does not extend to any future ISSB Standards. When the ISSB publishes any new standards in the future, the HKICPA will engage with relevant stakeholders to decide on the potential adoption of those new standards in Hong Kong as appropriate.