New Era of Climate Disclosure for Hong Kong Listed Companies 25 April 2024 New Era of Climate Disclosure for Hong Kong Listed Companies April, 2024 EXECUTIVE SUMMARY • On 19 April 2024, the Hong Kong Stock Exchange (“HKEX”) released the Consultation Conclusions on Enhancement of Climate-related Disclosures under the Environmental, Social and Governance Framework (following on from a Consultation Paper issued in April 2023) laying out new requirements in respect of climate-related disclosures (“New Climate Requirements”) • The requirements are aligned with IFRS S2 Climate-related Disclosures (“IFRS S2”) to the maximum extent possible • The HKEX has put in place a phased approach to implementation of the new requirements based on tiers of issuers (large cap issuers, main board issuers other than large cap issuers and GEM issuers) (“Phased Approach”) • A number of different implementation reliefs have been put in place in order to ease the difficulties of compliance for issuers • HKEX issuers now have final clarity on the New Climate Requirements and will be able to focus efforts on practical steps needed to deal with the challenge of being ready to meet the new reporting requirements Introduction & background On 14 April 2023, the HKEX published a Consultation Paper seeking views on proposals to amend its ESG reporting framework, which is predominantly set out in Appendix C2 to the Main Board Listing Rules and GEM Listing Rules, to mandate that listed issuers make climate-related disclosures based on the then proposed IFRS S2 in their ESG reports. Since that date: • • • • • the International Sustainability Standards Board (“ISSB”) finalised its proposals with the issuance in June 2023 of IFRS S1 General Requirements for Disclosure of Sustainability-related Financial Information (“IFRS S1”) and IFRS S2 aiming to serve as the global baseline of sustainability reporting standards for entities worldwide to prepare consistent, comparable and reliable sustainability disclosures. In July 2023, the International Organization of Securities Commissions endorsed the IFRS Sustainability Disclosure Standards (“IFRS SDS”) and called on its member jurisdictions to consider ways in which they might adopt, apply or otherwise be informed by the IFRS SDS within the context of their jurisdictional arrangements. In February 2024, the IFRS Foundation published the ISSB Adoption Guide Preview, which suggests a focus on publicly accountable entities and allows jurisdictional regulators to classify these entities into different market tiers with reference to thresholds such as an issuer’s size, volume of traded securities or liquidity, and consider an accelerated introduction of the requirements of the IFRS SDS for the more advanced market tiers. In March 2024, the Hong Kong Government’s Financial Services and the Treasury Bureau (“FSTB”) published a statement (“Vision Statement”) setting out the vision and approach of the Government and financial regulators towards developing a comprehensive ecosystem for sustainability disclosure in Hong Kong. In particular, the Hong Kong Institute of Certified Public Accountants (“HKICPA”) will assume the role of the sustainability reporting standard setter in Hong Kong to develop local sustainability reporting standards aligned with the IFRS SDS as well as complementary application and implementation guidance. On 12 April 2024, under the auspices of the China Securities Regulatory Commission (“CSRC”), the Shanghai Stock Exchange, the Shenzhen Stock Exchange and the Beijing Stock Exchange issued the guidelines for the sustainability reporting of listed companies Taking account of these developments and responding to feedback of constituents to the Consultation Paper (which contained strong support for the proposals though with a number of constituents calling for closer alignment with the final IFRS SDS), the HKEX published on 19 April 2024 the Consultation Conclusions which adopt all the proposals in the Consultation with certain modifications to reflect the requirements of IFRS S2 to the maximum extent possible. In addition, concurrently with the publication of the Consultation Conclusions, the HKEX also published an Implementation Guidance which, among other things, contains the conceptual foundations and general requirements of IFRS S1 (see later section “Implementation Guidance and IFRS S1” for details). Core Content of the climate-related disclosures The existing requirements of Parts B and