Governance Briefing — HKEX ISSB-aligned climate disclosure rules
Hong Kong-listed issuers must deliver ISSB-aligned climate disclosures for financial years starting 1 January 2025, with boards demonstrating climate governance, universal opt-out controls for stakeholder data, and assurance-ready evidence.
Executive briefing: Hong Kong Exchanges and Clearing Limited (HKEX) confirmed on 19 April 2024 that every Hong Kong-listed issuer must begin reporting climate-related disclosures aligned with the International Sustainability Standards Board (ISSB) framework for financial years starting on or after 1 January 2025. The Listing Rules amendments in Appendix C2 require boards to govern climate risk formally, describe strategy and risk management integration, set metrics and targets, and document transitional relief decisions made for the first two reporting cycles. Issuers need a fully documented governance model, granular transition plans, and a reliable audit trail that will stand up to regulatory review, investor interrogation, and potential assurance engagements.
Regulatory context and scope
HKEX is embedding IFRS S2 Climate-related Disclosures into the Listing Rules to replace the previous “comply or explain” ESG Code with mandatory requirements. The rules adopt the four ISSB pillars—governance, strategy, risk management, and metrics and targets—and they expect coverage across Scopes 1, 2, and relevant Scope 3 emissions once reasonable and supportable data exist. Large-cap issuers (Hang Seng Composite LargeCap Index constituents) must provide full quantitative metrics from the 2025 financial year onward, while other issuers may defer specific quantitative disclosures until the second reporting year. Nevertheless, all issuers must describe governance structures, scenario analysis approaches, and transition plans in the first year, even where metrics are subject to transitional relief. Foreign private issuers with a secondary HK listing remain within scope, so multinational groups should align HKEX disclosures with SEC, CSRD, and Singapore SGX filings to avoid contradictory statements.
The consultation conclusions emphasise proportionality but set a high expectation for forward-looking scenario analysis and financed emissions disclosure where material. HKEX encourages issuers to explain how they identify material climate-related risks and opportunities, link them to enterprise risk management, and quantify financial effects in narrative form when precise numbers are not yet available. Boards must confirm oversight of climate-related risks, describe committee responsibilities, and articulate how management reports into those structures. Issuers are also expected to explain how climate considerations influence remuneration, capital allocation, supply chain engagement, and resilience planning.
Implementation milestones
Boards should approve a mobilisation roadmap before the FY2025 reporting period opens. In practice, this means completing a double materiality assessment by Q3 2024, refreshing the climate risk register, and validating data owners for each mandatory metric. Finance, sustainability, and risk teams need an integrated reporting calendar that aligns HKEX timelines with other global filings to avoid rework. Issuers that rely on overseas subsidiaries for emissions data should codify data collection protocols now, including escalation paths when subsidiary figures arrive late or incomplete. HKEX has flagged that it will monitor how issuers use transitional relief; therefore, every omission must be justified through documented data limitations and a remediation plan with clear deadlines.
Governance operating model
Effective oversight requires more than adding climate to a meeting agenda. Boards should confirm which committee—audit, risk, sustainability, or a dedicated climate committee—owns detailed oversight and how frequently it receives updates. Meeting minutes must reflect substantive discussions about climate resilience, transition risk, acute physical risk, and opportunities created by low-carbon products or services. Management should establish a climate governance forum that includes finance, legal, operations, investor relations, and technology leads so that scenario analysis, target setting, and capital expenditure planning are connected. Training programmes for directors and senior executives need to cover ISSB concepts, HKEX disclosure expectations, and cross-jurisdictional interactions with EU CSRD, UK Sustainability Disclosure Standards, and China’s evolving climate reporting framework. Aligning climate governance with enterprise risk management (ERM) ensures that climate metrics flow into risk appetite statements, key risk indicators, and internal control testing.
Universal opt-out expectations
Although the Listing Rules focus on corporate disclosures, issuers must still respect personal data rights when gathering information for climate reporting, community engagement, or stakeholder surveys. Adopt a universal opt-out standard across all investor, customer, and employee communications related to sustainability initiatives. Provide simple mechanisms—such as preference centres or one-click links—for individuals to decline marketing updates about climate programmes or to withdraw consent for data sharing with external consultants. Document how the opt-out process operates across jurisdictions, including Mainland China, the European Union, and the United States, to avoid conflicts with GDPR, China’s Personal Information Protection Law (PIPL), or California Consumer Privacy Act (CCPA) requirements. Where climate reporting relies on supplier or customer data, communicate contractual opt-out choices and honour them consistently, ensuring that refusal does not result in discriminatory treatment. Maintaining a centralised register of opt-out requests, integrated with CRM and investor relations tools, will demonstrate respect for stakeholder rights and reduce the risk of privacy complaints while climate disclosures expand.
Evidence and assurance readiness
HKEX expects issuers to retain complete evidence supporting every disclosure. Develop a documentation matrix that maps each ISSB requirement to underlying evidence such as board papers, management presentations, scenario models, greenhouse gas (GHG) inventories, and internal audit reports. Store artefacts in a controlled repository with retention policies aligned to both HKEX rules and internal audit standards. Independent assurance may become mandatory in future phases, so issuers should run mock assurance walkthroughs in 2024 to test the completeness and accuracy of their evidence. Track data lineage for every GHG metric, documenting calculation methodologies, emission factors, and any estimation techniques used. When leveraging third-party platforms or consultants, ensure contracts specify evidence ownership, service-level expectations, and access rights for auditors. Establish a change log capturing updates to methodologies, scenario assumptions, and transition plans so reviewers can understand how disclosures evolve year over year.
Data and technology enablement
High-quality climate reporting relies on robust data architecture. Inventory all data sources feeding HKEX disclosures, including IoT sensors, energy bills, supply chain questionnaires, and financial systems. Implement automated validations to flag anomalies in emissions intensity, renewable energy certificates, and carbon offset claims. Where manual data entry persists, deploy dual-control checks and provide role-based training to limit human error. Integrate emissions data into enterprise planning tools so finance teams can model climate scenarios alongside budgeting and forecasting. Leverage data catalogues to document metadata, data quality rules, and responsible owners for each dataset. Because universal opt-out requirements extend to technology vendors, ensure that APIs, data lakes, and analytics platforms honour suppression lists and encrypt personal identifiers collected during stakeholder engagement.
Risk management alignment
Climate disclosures should reinforce enterprise risk management rather than operate as a standalone project. Update risk taxonomies to reflect chronic and acute physical risks, transition and liability risks, and emerging regulatory risks linked to ISSB implementation. Assign quantitative risk appetite metrics—such as maximum tolerable downtime from extreme weather, carbon price sensitivities, or financing exposure to high-emitting sectors—and integrate them into quarterly risk reports. Stress-test strategic plans using multiple climate scenarios (e.g., 1.5°C, 2°C, and 3°C pathways) and document the methodology, data sources, and governance approvals for each. Coordinate with treasury and investor relations to explain how climate risks influence cost of capital, green financing opportunities, or sustainability-linked bond covenants. The evidence pack should include board-approved risk mitigation plans, insurance policy reviews, and adaptation investments.
Stakeholder engagement and communications
Transparent engagement reduces the likelihood of investor activism or regulatory scrutiny. Align HKEX disclosures with communications issued through annual reports, sustainability reports, and investor roadshows to avoid conflicting narratives. Provide sector-specific insights—such as how real estate portfolios address embodied carbon or how financial institutions manage financed emissions—that respond to stakeholder expectations. Capture feedback from investors, NGOs, and rating agencies, and record how management considered that feedback. Honour universal opt-outs during all engagement campaigns and maintain evidence showing when opt-out preferences were applied to mailing lists or webinar invitations. When communicating transition plans, detail capital allocation decisions, research and development investments, and workforce transformation programmes so stakeholders can assess credibility.
Action checklist
- Complete an ISSB-aligned gap assessment covering governance, strategy, risk management, and metrics, and obtain board sign-off on remediation priorities by Q3 2024.
- Design a climate governance charter that specifies board and management responsibilities, reporting cadence, escalation triggers, and director competency development requirements.
- Implement a universal opt-out process spanning investor relations, marketing, and supplier engagement systems, and test suppression lists before the FY2025 reporting cycle.
- Build an evidence catalogue that maps every disclosure to supporting documentation, data owners, and assurance-ready controls, with quarterly internal audit checkpoints.
- Integrate climate metrics, scenario outputs, and risk analytics into enterprise planning and disclosure management platforms to streamline multi-jurisdictional reporting.
Zeph Tech equips Hong Kong issuers with climate governance operating models, opt-out compliant stakeholder engagement workflows, and evidence management playbooks that meet HKEX’s ISSB-aligned disclosure expectations.
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