Hong Kong’s financial institutions are poised to adopt new sustainability reporting standards under proposals by the HKICPA.
According to ESG Today, these proposed standards, fully aligned with the IFRS Foundation’s International Sustainability Standards Board (ISSB), target an effective date of August 2025, signalling a major shift towards international compliance in sustainability disclosures.
Earlier this year, following the Hong Kong Government’s release of a vision statement on enhancing the local sustainability disclosure ecosystem, the HKICPA was tasked with the development of these standards. The vision aims to bring Hong Kong’s sustainability reporting requirements in line with global norms and encompasses entities such as listed companies, banks, fund managers, and insurance companies. Additionally, a roadmap is expected later this year, which will outline further steps towards comprehensive sustainability reporting for businesses within the region.
This initiative traces back to the ISSB’s inception at the COP26 climate conference in November 2021, with the mission to establish IFRS Sustainability Disclosure Standards. These standards are designed to equip investors with crucial data on sustainability risks and opportunities, addressing the growing demand for transparency in environmental, social, and governance (ESG) factors. In June 2023, the ISSB unveiled its inaugural general sustainability (IFRS S1) and climate (IFRS S2) reporting standards.
HKICPA’s latest proposals, HKFRS S1 and HKFRS S2, aim to be in complete harmony with the IFRS’s S1 and S2 standards, bolstered by a technical feasibility study and extensive stakeholder engagements completed in June 2024. This alignment is seen as a strategic move to integrate Hong Kong businesses more tightly with global and Mainland Chinese capital markets.
Roy Leung, President of the HKICPA, emphasized the significance of these standards, noting, “HKFRS S1 and S2 are crucial in aligning Hong Kong’s sustainability reporting with the global baseline. By enhancing consistency and comparability, these standards will better meet the needs of investors seeking reliable sustainability information.”
Echoing this sentiment, ISSB Vice Chair Jingdong Hua highlighted the benefits of alignment, stating, “By proposing full alignment to ISSB Standards, investors will be best placed to compare disclosures from Hong Kong companies with their peers around the world.”
This convergence represents a critical step in aligning Hong Kong with global financial markets, enhancing the transparency and reliability of sustainability reporting across the region.
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