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, according to a new proposal released by the exchange, with the new rules anticipated to take effect for financial periods beginning January 1, 2024.

The new rules, released alongside a consultation paper into the proposals, would represent a significant increase in the reporting provided by many companies, in areas including Scope 3 emissions, or those arising through the value chain outside of a company’s direct control, and scenario analysis to determine climate resilience. A report released by Hong Kong Exchanges and Clearing Limited (HKEX) in November 2022 found that, while many companies already reported on Scope 1 and 2 emissions, only around a third of issuers have started reporting on Scope 3 emissions, and around 5% have adopted climate-related scenario analysis.

In order to address issuers’ concerns about the need to ramp up climate reporting, and in light of current readiness, the exchange’s 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.

Climate-related disclosure requirements under the new proposals cover a range of areas including companies’ governance of climate-related risks and opportunities, strategy topics ranging from the disclosure of material risks and opportunities and transition plans to scenario analysis-based climate resilience and the anticipated financial effects of climate-related risks and opportunities. The proposed 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, reporting on internal carbon prices, if used, and disclosure of the use of climate-related considerations in executive remuneration.

Katherine Ng, Head of listing at HKEX, said:

“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. Our proposals aim to accelerate the building of resiliency and the sustainability journey of our issuers, further strengthening Hong Kong’s position as a trusted and attractive venue for capital raising.”

Responses to the consultation will be accepted until July 14, 2023. Click here to access the consultation paper.