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HKEX to ramp up Climate Change reporting standards by early 2024

A newly released consultation paper from the Hong Kong Stock Exchange plans to make its listed companies quantify and reveal more about their climate-related risks by next year.

Under the proposals, all issuers listed on the Stock Exchange of Hong Kong will be required to provide climate-related disclosures aligned with the International Sustainability Standards Board’s (ISSB) upcoming Climate Standard, starting on January 1st 2024.

Under Hong Kong’s new rules, companies will have to report details of transition plans, measure and disclose Scope 3 emissions, and elaborate for investors the risks and opportunities presented by climate change, rather than the “comply or explain” provision currently being followed.

This represents a significant increase in the reporting provided by most companies, as Scope 3 emissions, arising through the value chain outside of a company’s direct control, and scenario analysis to determine climate resilience, are notoriously the least reported currently, according to a report released by Hong Kong Exchanges and Clearing Limited (HKEX) in November 2022.

To allay listed companies’ concerns, the proposals include interim provisions, allowing issuers to provide quantitative disclosures for the first two years for some disclosures such as Scope 3 emissions, the financial effects of climate-related risks and opportunities, and certain cross-industry metrics.

But as of 2026, they must be fully compliant.

The new rules would also mandate disclosure of metrics and targets including Scope 1, 2, and 3 emissions, the amount and percentage of assets vulnerable to transition and physical risks or aligned with climate-related opportunities as well as the amount of capex deployed towards these risks and opportunities.

This will make Hong Kong one of the first exchanges to align compulsory disclosures with the ISSB standards. Singapore already has mandatory reporting for certain industries, whilst Australia is preparing a standard for climate-related financial disclosures.

”With climate change being a global concern and focus, investors are demanding more information on how climate issues and related policy change could impact an issuer’s assets, business operations and financials”, Katherine Ng, Head of Listing at HKEX, said.

The consultation is open to feedback until July 14.

For more information on the consultation paper, please click here.