On 14 April 2023, The Stock Exchange of Hong Kong Limited (Exchange) published a consultation paper seeking market feedback on proposals to enhance climate-related disclosures under the environmental, social and governance (ESG) framework.
Background
In December 2020, the Green and Sustainable Finance Cross-Agency Steering Group announced that climate-related disclosures aligned with the recommendations of the Task Force on Climate-related Financial Disclosures (TCFD) will be mandatory across relevant sectors no later than 2025.
In March 2022, the International Sustainability Standards Board (ISSB), established by the International Financial Reporting Standards Foundation, published the “IFRS S2 Climate-related Disclosures Exposure Draft”, which, building on the principles of the TCFD recommendations, sets out the specific requirements for the identification, measurement and disclosure of climate-related financial information (ISSB Climate Standard). ISSB has been working towards issuing the final version by the end of the second quarter of 2023.
Mandatory climate-related disclosures in ESG reports
Appendix 27 to the Listing Rules currently contains certain elements of the TCFD recommendations, where issuers are required to disclose a board statement regarding the board’s governance and oversight of ESG issues. There are also requirements to disclose certain climate-related information on a “comply or explain” basis.
The Exchange proposes to mandate all issuers to make climate-related disclosures in their ESG reports (i.e. updating from “comply or explain”), and introduce new climate-related disclosures aligned with the ISSB Climate Standard to be set out in a new Part D of Appendix 27 to the Listing Rules.
Proposed implementation date
Subject to responses to the consultation, the revised Listing Rules and Appendix 27 will come into effect on 1 January 2024 and apply to ESG reports in respect of financial years commencing on or after 1 January 2024.
Acknowledging the readiness of the issuers and their concerns, the Exchange proposes interim provisions for certain disclosures for the first two reporting years following the effective date of 1 January 2024 (Interim Period).
Proposed climate-related disclosure requirements
A summary of the key proposals on the new climate-related disclosure requirements, categorised under four core pillars (namely, Governance, Strategy, Risk Management, and Metrics and Targets), is set out below:
The consultation period will end on 14 July 2023.
