Race to Net Zero – Starting from Climate Data Disclosure

Green Finance Advisor of Friends of the Earth (HK)

The Hong Kong Stock Exchange plans to make its listed companies quantify and reveal more about their climate-related risks, starting in January 2025.

The proposed new disclosures would be stricter and more extensive than Hong Kong’s current “comply or explain” framework, which asks companies to make disclosures or justify their absence. They would align the market with rules being developed by the International Sustainability Standards Board, established by the IFRS Foundation as a complement to its International Accounting Standards Board. 

Under Hong Kong’s new proposed 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. For the first two years, companies can describe some of these measures without quantifying them, but as of 2026, they must be fully compliant, HKEX said in a consultation paper .  IPO applicants will also have to disclose material ESG information in their prospectuses.

The proposal, which is open for feedback until July 14, would make Hong Kong one of the world’s first exchanges to try to align compulsory disclosures with the ISSB. Singapore has mandatory climate reporting for some industries while others are only expected to “comply or explain.” China is considering mandatory ESG disclosures, starting with state-owned enterprises, and Australia is working on a standard for climate-related financial disclosures.

Indeed, the ESG disclosure in Hong Kong has been improved over the last 3 years. According to the data compiled by Bloomberg, using ESG Disclosure Score as an indicator to measure the ESG disclosure level, from fiscal year 2020, 2021 and 2022, the ESG data disclosure has been leading both global and APAC peers. Even though ESG disclosure was on “Comply or explain” basis in the past, majority of listed companies had started to up their game on ESG disclosure. The announcement of mandatory TCFD disclosure no later than 2025 since December 2020 gave no surprise to the market to be prepared for the improved disclosure. 

With improved data, the race to net zero for Hong Kong corporations would become more competitive and investors and lenders could then access their ESG and climate-related risk more effectively.

Source: Bloomberg