A consultation paper published by Hong Kong Exchanges and Clearing Ltd (HKEX) seeks market feedback on proposals to align Hong Kong’s climate-related disclosure regime with international standards.

On 14 April 2023, HKEX published a public consultation – Enhancement of Climate-related Disclosures under the Environmental, Social and Governance (ESG) Framework – proposing to create a new Part D of the Environmental, Social and Governance Reporting Guide (Appendix 27 of Hong Kong’s Listing Rules), upgrading the climate-related reporting requirements for listed companies in Hong Kong.  

The proposed new requirements are intended to align Hong Kong’s ESG regime with global standards – in particular the global baseline for climate disclosures currently being finalised by the International Sustainability Standards Board (ISSB). The ISSB will publish its finalised climate standards by the end of the second quarter of 2023, but draft standards were published in March 2022 – in particular the S2 Climate-related Disclosures Exposure Draft (S2 Exposure Draft). HKEX has based its consultation proposals on the S2 Exposure Draft and subsequent ISSB deliberations up to April 2023.  

The consultation aims to give issuers more time to get familiar with these incoming climate-related reporting requirements. HKEX will continue to monitor developments and take into account the final ISSB climate standards when finalising the Listing Rule amendments. 

Key proposals 

The ISSB approach to climate disclosure builds on the recommendations of the Task Force on Climate-related Financial Disclosures (TCFD), which are structured around four thematic areas: 

  1. governance
  2. strategy
  3. risk management, and 
  4. metrics and targets.

The HKEX consultation proposed changes are categorised under same four core areas.

1. Governance

Listed companies will be required to disclose the governance process, controls and procedures used to monitor and manage climate-related risks and opportunities.

2. Strategy

Climate-related risks and opportunities. Listed companies will be required to disclose their material climate-related risks and, where applicable, opportunities, and their impact on the issuer’s business operations, business model and strategy. 

Transition plans. Issuers will need to disclose their response to climate-related risks and opportunities identified, including any changes to their business model and strategy, adaptation and mitigation efforts, and climate-related targets set for such plans. 

Climate resilience. Issuers will need to disclose the resilience of their strategy (including their business model) and operations to climate-related changes, developments or uncertainties, which shall be assessed using climate-related scenario analysis that is commensurate with the issuer’s circumstances. Scenario analysis is a tool for assessing how the future might look if certain trends continue or certain conditions are met. 

Financial effects of climate-related risks and opportunities. Issuers will be required to disclose the current (quantitative where material) and anticipated (qualitative) financial effects of climate-related risks, and where applicable, opportunities, on their financial position, financial performance and cash flows.

3. Risk management

Listed companies will be required to disclose the process used to identify, assess and manage climate-related risks and, where applicable, opportunities.

4. Metrics and targets

GHG emissions. Listed companies will be required to disclose their Scope 1, Scope 2 and Scope 3 GHG emissions. 

Other cross-industry metrics. Issuers will need to disclose the amount and percentage of assets or business activities vulnerable to transition/physical risks, or aligned with climate-related opportunities, and the amount of capital expenditure deployed towards climate-related risks and opportunities. 

Internal carbon price. Issuers will be required to disclose the internal carbon price, if they maintain one, applied in their decision-making. 

Remuneration. Issuers will be required to disclose how climate-related considerations are factored into executive remuneration policy. 

Industry-based metrics. Issuers should consider industry-based disclosure requirements prescribed under international ESG reporting frameworks and make disclosures as the issuer sees fit.

Other proposals

Consequential amendments to Appendix 27 are also proposed to reflect the adoption of the new Part D4. HKEX also proposes to change the name of Appendix 27, which sets out the ESG disclosure requirements listed companies need to comply with in their ESG reports. The HKEX consultation points out that the word ‘guide’ in the current name – The Environmental, Social and Governance Reporting Guide – may give people the impression that Appendix 27 offers only voluntary guidance.  

Some of the requirements of Appendix 27 are mandatory or subject to a comply-or-explain mechanism and a failure to comply with such requirements would therefore constitute a breach of the Listing Rules. In order to clarify the nature of Appendix 27, HKEX proposes to rename it the Environmental, Social and Governance Code and to make consequential changes to relevant Listing Rules to reflect the name change. 

Transition arrangements

Subject to responses received in the consultation, HKEX proposes the revised Listing Rules and Appendix 27 to become effective on 1 January 2024 (Effective Date). Not all of the proposed requirements would apply to issuers’ ESG reports in respect of financial years commencing on or after the Effective Date, however. The consultation proposes to allow issuers to comply with interim measures for the requirements set out below for the first two reporting years following the Effective Date. All listed companies 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. 

1. Anticipated financial effects of climate-related risks and opportunities

To provide more time for issuers to comply with the requirement to disclose their assessment of the anticipated financial impact of climate-related risks and opportunities, HKEX proposes to require issuers to describe the anticipated financial effects in qualitative terms. Moreover, during the interim period, where an issuer has yet to provide disclosures on these anticipated effects, they should disclose: 

  • information, to the extent reasonably available, that may enable investors to understand the aspects of the financial statements that are most affected, and 
  • the work plan, progress and timetable for making the required disclosure.

2. Scope 3 GHG emissions 

The consultation proposes to require listed companies to issuers to apply either the GHG Protocol, or the protocol prescribed by local legislation for measuring GHG emissions. 

Companies will need to report on their:

  • Scope 1 emissions – covering direct GHG emissions that occur from sources that are controlled or owned by a company 
  • Scope 2 emissions – covering indirect emissions from purchased electricity, heat, steam and cooling, and 
  • Scope 3 emissions – covering all other indirect emissions that occur in a company’s value chain such as business travel, purchased goods and services, waste disposal and employee commuting. 

HKEX recognises that reporting on Scope 3 emissions will present practical difficulties for companies, particularly in the collection of data from upstream and downstream stakeholders which they have no control over. The consultation therefore proposes to give companies more time to identify significant Scope 3 activities, collect data and build appropriate calculation models. 

During the interim period, issuers would be required to disclose:

  • information that enables investors to understand the issuer’s relevant upstream or downstream activities along the value chain, and
  • their work plan, progress and timetable for full disclosure of Scope 3 GHG emissions.

3. Other cross-industry metrics

HKEX proposes to require issuers to make disclosures relating to a number of cross-industry climate-related metrics that the ISSB deems useful in informing investors and stakeholders of companies’ exposure to climate-related risks, and how far companies have integrated climate-related considerations into their business strategies. These metrics include the amount of capital expenditure, financing or investment deployed towards climate-related risks and opportunities, and the amount and percentage of assets or business activities vulnerable to transition and physical risks, or aligned with climate-related opportunities. 

To give issuers more time to familiarise themselves with the calculation methodologies and explore ways to address their concerns on data accuracy and credibility, during the interim period issuers will be required to:

  • describe the assets or business activities vulnerable to or aligned with such risks or opportunities, or that require capital expenditure, and
  • their work plan, progress and timetable for full disclosure.


To assist issuers in understanding and complying with the new requirements, HKEX will issue implementation guidance together with the consultation conclusions to: 

  • set out principles, guidelines and illustrative examples for the implementation of the new Listing Rules
  • refer issuers to external frameworks, tools and guidelines helpful for disclosures, and 
  • set out a glossary of technical terms/acronyms commonly used in international ESG reporting frameworks, such as those of the ISSB. 

The significance of the consultation proposals

Mandatory climate-related disclosures aligned with the ISSB and TCFD have been coming to Hong Kong for some time. The Hong Kong Green and Sustainable Finance Cross-Agency Steering Group announced its intention to implement such a mandatory disclosure regime by 2025 for the financial sector. The latest HKEX consultation is designed to help listed companies prepare for these tougher requirements relating to climate disclosure.  

The consultation should also be seen in the context of the carbon neutrality target set by the Hong Kong government. The government seeks to make Hong Kong carbon neutral by 2050 and has launched its Climate Action Plan setting out initiatives to reduce carbon emissions for a smooth transition to a low-carbon, climate-resilient economy. The upgrading of Hong Kong’s climate disclosure regime will help Hong Kong meet these goals and, in doing so, maintain its competitiveness as an international financial centre. 

‘Our proposals aim to accelerate the building of resiliency and the sustainability journey of our issuers, further strengthening Hong Kong’s position as a trusted and attractive venue for capital raising,’ says Katherine Ng, Head of Listing, HKEX. 

The consultation proposals are supported by the Securities and Futures Commission (SFC) as a step towards aligning Hong Kong with the ISSB global baseline for climate-related reporting standards. 

‘Hong Kong’s early adoption of climate-related corporate reporting requirements will consolidate its position as a leading green and sustainable finance hub within the region and globally,’ says Julia Leung, Chief Executive Officer, SFC.  

The consultation paper reviewed in this article is available at the HKEX website: www.hkex.com.hk. The consultation ends 14 July 2023.