Introduction

In a groundbreaking move, the Hong Kong government has unveiled its Roadmap on Sustainability Disclosure, setting the stage for mandatory sustainability reporting among businesses. This new initiative aims to align local practices with the International Financial Reporting Standards (IFRS) Foundation’s International Sustainability Standards Board (ISSB) standards.

Starting next year, some listed companies will be required to adopt these reporting standards on a "comply or explain" basis, and large-cap companies will face mandatory compliance by 2026.

Building on Previous Initiatives

This roadmap builds on the government’s earlier vision statement from this year, which focused on creating a comprehensive sustainability disclosure ecosystem in Hong Kong. The initiative targets a wide range of entities, including listed companies and regulated financial institutions, such as banks, fund managers, and insurance companies, all of which will need to adapt to these new standards.

Standards Overview

The ISSB standards, unveiled in June 2023, focus on general sustainability (IFRS S1) and climate-related disclosures (IFRS S2). The Hong Kong Institute of Certified Public Accountants (HKICPA) is expected to finalize its ISSB-aligned standards by the end of this year, with an effective date set for August 1, 2025.

Key Milestones

Key milestones in the roadmap include:

- Main Board issuers must begin reporting on climate-related disclosures in 2025.

- Large-cap companies will have mandatory compliance starting in 2026.

- The Hong Kong Stock Exchange (HKEX) will consult on requiring sustainability reporting for all listed publicly accountable entities (PAEs) by 2028.

- Significant financial institutions will also be required to adopt these standards by the same deadline.

Support Measures

Moreover, the roadmap outlines a suite of support measures to aid in the implementation of these reporting requirements. Initiatives include developing a regulatory framework for sustainability assurance, promoting green fintech innovations, offering free data tools, and broadening the Hong Kong Taxonomy for Sustainable Finance.

Official Statements

Christopher Hui, Hong Kong’s Secretary for Financial Services and the Treasury, emphasized the importance of this initiative, stating, “As a premier international financial centre and a green and sustainable finance hub, Hong Kong is taking consistent steps to enhance its competitiveness by adhering to international standards and best practices. The launch of this roadmap on the full adoption of the ISSB Standards demonstrates our commitment to leading the way in promoting sustainable finance and investment aligned with global green transition goals.”

Conclusion

With these bold steps, Hong Kong aims to position itself as a leader in sustainable business practices, responding robustly to the increasing global emphasis on environmental, social, and governance (ESG) criteria. Stay tuned for further updates as Hong Kong transforms its sustainability landscape, setting a precedent for other regions to follow!