Hong Kong Exchanges and Clearing Limited (HKEX) recently published its consultation conclusion on its enhanced climate-related disclosure requirements on April 19, strengthening the exchange’s environmental, social and governance (ESG) reporting requirements and, it says, reinforcing its intention to remain a leading Asia-Pacific bourse in terms of ESG governance.

The enhanced rules, according to HKEX, will be implemented via a phased approach based on different disclosure scope and issuer types, and their incorporation into the exchange’s existing ESG disclosure rules will broaden the current requirements and make the whole reporting framework more consistent with the International Sustainability Standards Board (ISSB) guidelines.

The disclosure for Scope 1 and 2 greenhouse gas (GHG) emissions will be mandatory and universally applied to all types of listed issuers – main board and Growth Enterprise Market (GEM) – for financial years commencing on or after January 1 2025.

For the disclosure of Scope 3 GHG emissions, the requirements vary among different types of issuers. Main board issuers are required to disclose such information on a “comply or explain” basis for financial years commencing on or after January 1 2025.

Notably among the main board issuers, those who are included in the Hang Seng Composite LargeCap Index, or so-called LargeCap issuers, will be required to elevate their disclosure from the “comply or explain” basis to the mandatory basis, commencing on or after January 1 2026.

GEM issuers are allowed to report such information on a voluntary basis, with an effective timeline consistent with those listed on the main board.

Source: HKEX

Along with the introduction of the enhanced climate-related disclosure requirements, the name of the HKEX’s ESG reporting rule was change to Environmental, Social and Governance Reporting Code from Environmental, Social and Governance Reporting Guide to reflect, the more stringent and mandatory nature of such reporting.

The consultation for this enhanced climate-related disclosure requirement was originally initiated in April 2023, with a proposed time for climate information reporting starting January 1 2024.

Later, based on the market feedback from 115 stakeholders, HKEX in November 2023 postponed the effective date of the climate-related disclosure requirements to allow issuers more time to digest and prepare for the new reporting requirements, as well as wider capacity building.

“With a strong market mandate, we are pleased to be among the world’s first exchanges to enhance the climate-related disclosure requirements based on IFRS [International Financial Reporting Standard] S2,” states Katherine Ng, the exchange’s head of listing. “We are also adopting a phased approach and implementation reliefs to support listed companies to meet the new requirements without undue burden and within a reasonable timeframe."

“The new climate requirements form part of the wider Hong Kong roadmap for the local adoption of the ISSB standards. This will be an important part of our ongoing efforts to prepare listed companies towards eventual sustainability reporting in accordance with the local sustainability disclosure standards under development, enhancing Hong Kong’s capital markets attractiveness and competitiveness.”