Hong Kong Suggests Sustainability Reporting Standards Aligned with IFRS

New exposure drafts containing suggested sustainability- and climate-related reporting standards for businesses have been released by the Hong Kong Institute of Certified Public Accountants (HKICPA). These standards are fully compliant with the guidelines published by the International Sustainability Standards Board (ISSB) of the IFRS Foundation.

The standards are intended to take effect in August 2025, according to the HKICPA proposal.

The government of Hong Kong released its “vision statement on developing the sustainability disclosure ecosystem in Hong Kong” earlier this year. This statement aimed to align local sustainability reporting requirements with international standards and was intended for entities such as listed companies and regulated financial institutions like banks, fund managers, and insurance companies. Later this year, the government plans to release a roadmap outlining a pathway on sustainability reporting for businesses in Hong Kong. The new proposals have been published in response to these previous announcements.

The government’s declaration included a requirement for the HKICPA to create local sustainability reporting guidelines that would be in line with ISSB guidelines.

The International Sustainability Standards Board (ISSB) of the IFRS Foundation was established at the COP26 climate summit in November 2021 with the objective of creating IFRS Sustainability Disclosure Standards to inform investors about the sustainability risks and opportunities faced by businesses. In June 2023, the IFRS published the first reporting rules for general sustainability (IFRS S1) and climate change (IFRS S2). The premier worldwide policy forum and standards-setter for securities regulators, IOSCO, urged authorities to adopt the guidelines into their sustainability reporting regulatory frameworks after they were released last year.

The HKICPA announced that, after careful consideration of a number of factors, including extensive stakeholder engagement and the completion of a technical feasibility study on the application of the ISSB Standards in Hong Kong in June 2024, it has proposed to fully converge its new standards, HKFRS S1 and HKFRS S2, with IFRS S1 and IFRS S2. The institution expressed its belief that a fully integrated market will strengthen the relationship between international capital and local enterprises, as well as those in Mainland China and other areas.

The HKICPA said that it is seeking comments on the new exposure drafts, with a public consultation remaining open until October 27.