After due consideration and deliberation of public comments received on the local consultation on exposure drafts of HKFRSS1 General Requirements for Disclosure of Sustainability-related Financial Information and HKFRS S2 Climate-related Disclosures (HK EDs) by its Financial Reporting Standards Committee, the Institute published its first two sustainability disclosure standards on 12 December 2024. HKFRS S1 and HKFRS S2 (HKFRS SDS), are fully aligned with the corresponding standards published by the International Sustainability Standards Board (ISSB).
The ISSB’s standards, IFRS S1 General Requirements for Disclosure of Sustainability-related Financial Information and IFRS S2 Climate-related Disclosures (ISSB Standards), provide a set of comprehensive standards aimed at achieving a global baseline for sustainability disclosures. Their endorsement by the International Organization of Securities Commissions reflects them as being fit for purpose in serving the needs of the capital market.
The decision of full alignment with the ISSB Standards was reached by the HKICPA after a holistic assessment of relevant factors, including local and international developments. Substantive evidence gathered from extensive engagement with a wide range of stakeholders over the past few years was also considered, starting with the publication of the draft ISSB Standards in early 2022 (2022 HKICPA consultation), the technical feasibility study (TFS) on the application of the ISSB Standards in Hong Kong in H1 2024, and the local consultation of the HK EDs in Q4 2024 (2024 HKICPA consultation).
Key figures:
Throughout all our engagements, investors continued to emphasize the importance for Hong Kong to align in full with the ISSB Standards. They conveyed the following key messages:
In light of the overwhelming support for full alignment with the ISSB Standards from respondents, the Institute decided to confirm its proposal to align HKFRS SDS in full with the ISSB Standards. As an international financial centre (IFC), Hong Kong’s full alignment with the ISSB Standards has global significance, bolstering the connection of global capital with local businesses as well as those in Mainland China and other regions.
The decision of full alignment relates to IFRS S1 and S2 only and does not extend to any future ISSB Standards. When the ISSB publishes any new standards in the future, the Institute will engage with relevant stakeholders to decide on the potential adoption of those new standards in Hong Kong as appropriate.
HKFRS SDS were developed in line with the Roadmap on Sustainability Disclosure in Hong Kong (HK Roadmap) published by the government on 10 December 2024. The HK Roadmap sets out Hong Kong’s approach to adopting the ISSB Standards and provides a well-defined pathway for large publicly accountable entities to apply the HKFRS SDS no later than 2028, taking into account the readiness and capacity of Hong Kong stakeholders. The HK Roadmap also elaborates on Hong Kong’s blueprint to develop a comprehensive ecosystem to support sustainability disclosures, which encompasses sustainability assurance, data and technology, as well as skills and competencies.
Moving forward, the Institute will be dedicated to capacity building to enable the successful implementation of HKFRS SDS. We will also continue to contribute to the holistic development of the local sustainability reporting ecosystem to solidify Hong Kong’s status as a leading IFC and a green and sustainable finance hub. Discover more about our journey by reading our informative infographic.
This article was contributed by Anthony Wong, Associate Director of the Institute’s Standard Setting Department.