IFRS S1, S2 and SASB: A Plain-English Baseline for Finance Teams

If you lead a finance team in Hong Kong, you are probably hearing three acronyms in the same breath: IFRS S1, IFRS S2 and SASB. Here is the plain-English version. IFRS S1 sets the general requirements for sustainability-related financial disclosures about the risks and opportunities that could reasonably affect your prospects — your cash flows, your access to finance, your cost of capital — over the short, medium or long term. The intended users are investors, lenders and other creditors. IFRS S2 is the climate-specific standard that sits alongside it.

What the standards actually require

Both standards organise disclosure around four pillars: governance, strategy, risk management, and metrics and targets. That structure is deliberate — it lines your sustainability story up with your financial reporting and with how investors actually make decisions. IFRS S2 builds on the TCFD recommendations and folds in industry-based climate metrics derived from SASB Standards. IFRS S1 and S2 were issued in June 2023 and are effective for annual reporting periods beginning on or after 1 January 2024, with early application permitted if you disclose it.

SASB matters more than people expect. Under IFRS S1, you must refer to and consider the applicability of SASB disclosure topics when identifying sustainability-related risks and opportunities — particularly where no specific IFRS Sustainability Disclosure Standard covers the topic. Think of SASB as the industry lens that stops you from reporting generic boilerplate.

How this lands in Hong Kong

HKEX Appendix C2, Part D of the ESG Reporting Code, contains climate-related requirements modelled on IFRS S2. A report that complies with IFRS S1 and S2 is considered to meet Part D. The climate requirements took effect for financial years beginning on or after 1 January 2025.

The phase-in is where finance teams need to be precise:

• Scope 1 and Scope 2 greenhouse-gas emissions disclosures are mandatory for all HKEX-listed issuers from financial years beginning on or after 1 January 2025.
• Other climate disclosures are on a "comply or explain" basis for Main Board issuers.
• Hang Seng Composite LargeCap constituents face mandatory requirements from financial years beginning on or after 1 January 2026.
• GEM issuers are encouraged to report.

Separately, HKICPA issued HKFRS S1 and HKFRS S2, aligned with the ISSB standards, with voluntary application effective from 1 August 2025. That gives you a local standards route alongside the listing-rule requirements. Looking ahead, Hong Kong's roadmap targets full adoption of the ISSB standards by large publicly accountable entities no later than 2028, and HKEX is expected to consult in 2027 on mandating the Hong Kong standards for listed publicly accountable entities, with an expected effective date of 1 January 2028.

What this means for your team on Monday

None of this is a reporting-only exercise. It asks for coordinated processes: identify material sustainability risks and opportunities, connect them to financial prospects, produce governance and risk-management evidence, and generate controlled metrics and targets. In Hong Kong you also need to track your issuer category, your reporting-year start date, and whether each climate disclosure is mandatory or "comply or explain."

Two pieces of relief are worth knowing. The ISSB's first-year relief lets an entity adopting S1 and S2 report only climate-related risks and opportunities under S2 in its first reporting year, and the SASB FAQ notes transition relief for Scope 3 emissions in the first year. Use that breathing room to build the process properly rather than to delay.

If you want a practical walk-through of how the pieces fit together, my companion guide, ESG Reporting Made Simple: A Practical Guide to IFRS S1, S2, and SASB Standards, is written for exactly this moment. You can also read the IFRS S1 supporting materials, the SASB FAQs, and HKEX's own guidance on linking the ISSB Standards and the ESG Reporting Code. Start with the pillar you can evidence today — governance is usually the cheapest place to begin.