Further jurisdictional transposition of the ISSB Standards, this time in Hong Kong

In 2023, the International Sustainability Standards Board published sustainability disclosure standards (“ISSB Standards”)—IFRS S1 and IFRS S2—intended to be a global benchmark for how companies can report on their sustainability-related (including climate-related) financial disclosures—i.e., sustainability-related risks and opportunities that could reasonably be expected to affect an entity’s prospects. For more on the ISSB Standards, see our prior article here and a one-page summary overview of their content here.

Since then, the ISSB Standards, which themselves are voluntary, have had strong international support, with many countries consulting on adopting them into national law, including the UK. In this article, we look at the recent implementation of the ISSB Standards in Hong Kong.

Roadmap for sustainability disclosures and Hong Kong disclosure standards

In December 2024, the Government of the Hong Kong Special Administrative Region (“Hong Kong Government”) announced its intention—as part of the Roadmap on Sustainability Disclosure in Hong Kong (the “Roadmap”)—to require large publicly accountable entities (“PAEs”) to adopt the ISSB Standards by no later than 2028. The Roadmap brings together the Hong Kong Government, financial regulators, Hong Kong Exchanges and Clearing Limited (“HKEX”) and the Hong Kong Institute of Certified Public Accountants (“HKICPA”) to “adopt a holistic approach in promoting the development of a comprehensive sustainability disclosure ecosystem in Hong Kong”.

Since publication of the Roadmap, the HKICPA issued, following a consultation, the final Hong Kong sustainability disclosure standards, HKFRS S1 and HKFRS S2, which are fully aligned with the ISSB Standards (the “Hong Kong Standards”). The Hong Kong Standards are with an effective date of 1 August 2025.

Key milestones

The Roadmap sets out a timeline for implementing sustainability disclosure requirements, first using the ISSB Standards followed by the Hong Kong Standards. It aims to provide a well-defined pathway for large PAEs to fully adopt the ISSB Standards no later than 2028. Key milestones are as follows:

• Main Board issuers are required to disclose against new climate-related disclosure modelling on IFRS S2 (“new climate requirements”)¹ on a “comply or explain” basis from 1 January 2025.
• Large cap issuers² are required to disclose against the new climate requirements on a mandatory basis from 1 January 2026.
• In 2027, HKEX will consult on mandating reporting in accordance with the Hong Kong Standards; it is expected that the standards will apply to large cap issuers from 1 January 2028.
• Relevant financial regulators will require non-listed financial institutions carrying a significant weight in Hong Kong (being non-listed PAEs) to apply the Hong Kong Standards no later than 2028.

Related developments

The ISSB Standards continue to evolve: at the end of January 2025, the ISSB tentatively decided to propose to make certain technical amendments to IFRS S2. In particular, one amendment would permit entities to exclude Scope 3 Category 15 greenhouse gas emissions (“GHG”) emissions associated with derivatives, facilitated emissions and insurance-associated emissions from the measurement and disclosure of Scope 3 Category 15 GHG emissions. The ISSB will begin the balloting process and plans to publish an exposure draft in the second quarter of 2025.

Looking ahead

The Roadmap notes that it gives sufficient time for large PAEs in Hong Kong to prepare themselves for implementation of the Hong Kong Standards. In addition, companies not within scope are encouraged to apply the Hong Kong Standards on a voluntary basis.

In the UK, we also await further announcement from the UK government on the implementation of expected UK Sustainability Reporting Standards based on the ISSB Standards, following publication in December 2024 by the UK Sustainability Disclosure Technical Advisory Committee of their technical assessment and endorsement recommendations paper on the endorsement of the ISSB Standards.

For further guidance and tailored advice on the ISSB Standards or anything else discussed in this Quick Read, please get in touch with your Charles Russell Speechlys contact.

¹ These are set out in Part D of the Environmental, Social and Governance Reporting Code, published in April 2024 by HKEX and coming into effect on 1 January 2025.

² Issuers that are Hang Seng Composite LargeCap Index constituents throughout the year immediately prior to the reporting year