Regulators are tightening sustainability reporting requirements to improve transparency and accountability around climate risks through climate action across global financial markets. Investors, regulators, and stakeholders increasingly expect companies to disclose how climate change affects operations, financial performance, and long-term strategy. Hong Kong is now accelerating its transition toward standardized climate related disclosure rules and frameworks aligned with international standards in line with the new climate requirements.

From January 1, 2025, the Hong Kong Stock Exchange (HKEX) and Hong Kong Institute of Certified Public Accountants (the HKICPA) introduced enhanced climate related disclosure rules under its Environmental, Social and Governance (ESG) Code along with related financial disclosures. These rules will be implemented in phases, with more stringent mandatory requirements taking effect in 2026 for large-cap issuers.

Related Read: Scaling Decarbonization in Financial Sector

The regulatory shift reflects Hong Kong’s broader roadmap to align corporate sustainability reporting with the International Sustainability Standards Board (ISSB) standards, particularly IFRS S1 and IFRS S2, which focuses on sustainability-related financial disclosures and climate-related risks.

For companies operating or listed in Hong Kong climate, this transition represents more than a regulatory update. It requires stronger Hong Kong ESG reporting governance structures, reliable climate data systems, and integrated risk management frameworks.

Strengthening Hong Kong Climate Related Disclosure Rules

Growing Global Demand for ESG Reporting Transparency

The global investment landscape has shifted dramatically in recent years. Institutional investors now place significant emphasis on ESG performance when evaluating companies. Climate risks, including extreme weather, supply chain disruptions, and carbon transition policies are increasingly viewed as financial risks that can affect business valuation and long-term profitability.

As a result, investors are demanding consistent and comparable climate-related financial disclosures. Companies that fail to provide transparent climate data risk losing investor confidence, facing higher capital costs, or being excluded from sustainable investment portfolios.

Alignment with Global Sustainability Standards

Hong Kong’s new climate requirements also reflect its commitment to aligning with global sustainability reporting frameworks. The new disclosure requirements introduced by HKEX are modeled closely on the ISSB climate related disclosure rules, which aim to establish a globally consistent baseline for sustainability reporting.

Related Read: GRI in Practice: A Sustainability Reporting Guide

These standards focus on four core pillars of climate related disclosure rule:

  1. Governance
  2. Strategy
  3. Risk Management
  4. Metrics and Targets

By adopting these globally recognized frameworks, Hong Kong ESG aims to enhance the credibility and comparability of ESG reporting guide in its capital markets. For companies listed on HKEX, aligning early with ISSB-based disclosures will provide a strategic advantage as global regulatory convergence accelerates.

Key Timeline: When the New Requirements Take Effect

2025: Initial Implementation Phase

Starting with financial year on or after January 1, 2025, listed companies in Hong Kong will be required to disclose Scope 1 and Scope 2 greenhouse gas (GHG) emissions. These disclosures are mandatory for all issuers under the revised ESG Reporting Code.

Other climate-related disclosures such as climate risk assessments and Scope 3 emissions will initially follow a “comply or explain” approach for most Main Board issuers.

2026: Mandatory Disclosure for LargeCap Companies

Companies included in the Hang Seng Composite LargeCap Index are required to meet enhanced climate-related disclosure expectations. This includes comprehensive reporting on climate governance, strategy, risk management processes, climate-related metrics and targets, and material Scope 3 value-chain emissions, necessitating robust data collection and reporting systems.

Long-Term Roadmap

Hong Kong regulators have signaled a longer-term goal of fully aligning sustainability reporting with ISSB standards by 2028, ensuring global consistency in new climate requirement in the reporting frameworks.

From an advisory perspective, organizations should focus on strengthening their reporting systems, governance frameworks, and data management capabilities to ensure readiness for evolving climate-related disclosure requirements and future regulatory expectations.

Core Climate Related Disclosure Rules

Governance

Companies must explain how climate-related risks and opportunities are governed within the organization. This includes the board’s oversight of climate risks and the role of management in assessing and managing climate issues. Clear governance structures ensure that climate risks are integrated into corporate decision-making processes.

Strategy

Organizations must disclose how climate change may affect their business model and long-term strategy. Key considerations include climate-related risks and opportunities, potential impacts on revenue streams, operations, and investments and business resilience under different climate scenarios.

Risk Management

Companies must outline the processes used to identify, assess, and manage climate-related risks. These processes should ideally be integrated with the organization’s broader enterprise risk management framework.

Metrics and Targets

Key metrics include:

Scope 1 emissions include direct emissions from company operations; Scope 2 emissions include indirect emissions from purchased energy, and Scope 3 emissions include indirect emissions across the value chain.

In practice, many companies find Scope 3 emissions particularly difficult to measure, as they require extensive data from suppliers, logistics providers, and customers. Early engagement with supply chain partners will therefore be essential.

Which Companies Will be Most Affected

The regulatory impact varies depending on the category of listed issuers.

LargeCap Issuers

 Companies included in the Hang Seng Composite LargeCap Index will meet the most stringent requirements. Full compliance with enhanced climate related disclosure rules have become mandatory from 2026.

Main Board Issuers

 Main Board companies are currently operating under the “comply or explain” framework, which provides flexibility during transition period while organizations strengthen their climate related disclosure and reporting practices.

GEM Issuers

 Companies listed on the Growth Enterprise Market (GEM) will initially face fewer mandatory requirements. They must disclose Scope 1 and Scope 2 emissions, while other climate related disclosures rules remain largely voluntary during the early phase.

However, even companies not fully mandated yet should begin aligning with the new framework. Waiting until requirements become compulsory could lead to compliance gaps and operational challenges.

Key Challenges Companies May Face

Preparing for enhanced climate related disclosure rules is not without challenges. Many companies encounter obstacles such as:

Limited climate data availability
Many organizations lack robust systems for collecting and verifying environmental data.

Difficulty measuring Scope 3 emissions
Value-chain emissions often require data from multiple suppliers across different regions.

Limited internal ESG expertise
Companies may not have in-house teams with the necessary sustainability reporting skills.

Integration of climate risk into financial planning
Aligning climate scenarios with financial decision-making requires new analytical tools.

Establishing board-level governance
Companies may need to restructure governance frameworks to ensure board oversight of climate issues.

These challenges highlight why organizations increasingly turn to ESG advisory firms for specialized guidance.

How Companies Should Prepare Now

Related Read: Textile Industry Decarbonization Roadmap: Path to Net Zero Textile Industry

Conduct a Climate Related Disclosure Rules Gap Analysis

Companies should evaluate current ESG reporting practices against HKEX requirements to identify compliance gaps.

Develop Emissions Measurement Systems

Implement reliable tools to measure Scope 1 and Scope 2 emissions, while building capabilities to track Scope 3 emissions over time.

Strengthen ESG Governance

Organizations should assign board oversight for climate risks and define clear management accountability.

Conduct Climate Risk Assessments

Companies should analyze both physical risks (extreme weather, flooding, supply disruptions) and transition risks (carbon pricing, regulatory changes, technology shifts).

Integrate Climate Strategy with Business Planning

New climate requirements considerations should be embedded into financial planning, capital allocation, and long-term corporate strategy.

Strategic Opportunities from Climate Related Disclosure Rules

Although regulatory compliance is the immediate driver, climate-related disclosure rules also offer several strategic advantages.

Companies that adopt robust Hong Kong ESG reporting guide or frameworks can benefit from improved investor confidence, access to sustainable finance and green bonds, stronger risk management capabilities, enhanced corporate reputation

Conclusion

Related Read: Financial Blueprint for Building Decarbonization: Tools and Strategies

Hong Kong ESG and enhanced climate related disclosure rules represent a major step toward standardized ESG reporting Hong Kong in Asia’s financial markets. With the first phase already underway and stricter mandatory requirements continuing to expand in 2026 and beyond, companies must strengthen their climate-related disclosure and reporting capabilities to ensure compliance with evolving regulatory expectations. Organizations that act early will not only ensure regulatory compliance but also position themselves to capitalize on emerging opportunities in sustainable finance and responsible investment.

Why Choose Ascentium?

Ascentium supports companies navigating Hong Kong’s evolving ESG and climate disclosure landscape through practical, end-to-end advisory services. We support businesses in conducting ESG gap assessments, establishing reliable data collection systems, and strengthening internal governance frameworks to meet regulatory expectations. Our advisory team supports companies in measuring Scope 1, 2, and gradually Scope 3 emissions while integrating climate risks into broader business and financial strategies. By partnering with Ascentium, companies can move beyond compliance and build stronger investor confidence, improve transparency, access sustainable finance opportunities, and enhance long-term resilience in an increasingly climate-conscious business environment. Write to us at info@incorpadvisory.in or reach out to us at (+91) 77380 66622 to learn more about our services.

Authored by:

Shreyash Khadse | ESG and Sustainability

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