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Hong Kong’s sustainability journey
As a leading hub for sustainable finance, the HK SAR Government is committed to supporting the disclosures of consistent and comparable climate and sustainability-related information in accordance with global standards. With some mandatory climate reporting requirements already in place for Main Board Issuers and set to expand significantly from 2028, the increasing focus on transparency is driving businesses towards responsible practices.
Commitment to the 2060 strategy
No, that’s not a typo! High quality ESG disclosures will be paramount towards demonstrating Hong Kong’s achievements towards meeting its 2060 dual carbon neutrality targets – that is, its commitment to reaching a peak in carbon dioxide emissions by 2030 and then gradually reducing them to achieve a balance between carbon emissions and carbon absorption by 2060.
A new approach to sustainability reporting
All large publicly accountable entities (including large listed issuers and non-listed financial institutions carrying significant weight) will be required to fully adopt the ISSB Standards no later than by 2028. Prior to that:
- From 1 Jan 2025: all Main Board issuers must disclose against New Climate Requirements (modelled on IFRS S2) on a “comply or explain” basis;
- From 1 Jan 2026: all Large Cap Issuers must disclose against New Climate Requirements on a mandatory basis.
Integrating ESG into business strategy
Sustainability reporting is a call to action! It’s not just becoming a regulatory requirement - but it’s also an opportunity to develop a competitive advantage and to demonstrate a commitment to long-term success, whatever the future may bring!
Ensuring credibility
As ESG reporting continues to expand, reliable and credible data and information will become increasingly important. ESG Assurance can help ensure that the disclosures reported provide trustworthy and realistic representations about an entity’s ESG evaluations and measurements to all key stakeholders.
Carl Yu
“ It is without any doubt that all companies must start to embrace ESG factors into their business strategies and long-term goals, if they have not already done so. This is not just to meet future regulatory requirements – but more importantly, this will be critical for businesses to survive and remain competitive in this rapidly changing environment. At RSM Hong Kong, we stand ready to serve our clients as they make their ESG journey”
Several recent regulatory updates from the Hong Kong government regarding ESG and climate reporting:
The Hong Kong Stock Exchange (HKEX) has established a mandatory reporting framework that requires all listed companies to disclose their ESG practices, with a particular emphasis on climate-related risks. Beginning January 1 2026, large issuers will be required to comply with the International Sustainability Standards Board (ISSB) standards, which mandate comprehensive reporting on climate impact and sustainability initiatives. This regulatory shift aims to enhance corporate transparency and build investor confidence.
The Hong Kong Financial Reporting Council (HKFRC) has been actively working to align local reporting standards with global frameworks. HKFRC is developing standards that will incorporate ISSB guidelines, ensuring that local businesses comply with international expectations for sustainability reporting.
The Hong Kong Stock Exchange (HKEX) offers ongoing guidance to companies for enhancing the quality of their ESG disclosures. In 2024, updated guidelines were released to help companies better understand material ESG issues, emphasizing the importance of reporting on governance, strategy, risk management, and climate-related performance metrics.
These regulatory updates indicate a significant commitment from the Hong Kong government to enhance ESG and climate reporting, fostering a more sustainable business environment in the region.
Some recent market insights on ESG and climate reporting in Hong Kong:
Training programs: The government, in partnership with professional bodies like the HKICPA, is providing training programs and workshops to improve businesses' understanding of ESG reporting. These initiatives focus on equipping finance professionals with the necessary skills to comply with new regulations and standards, including the ISSB framework and best practices for sustainability reporting.
Green and sustainable finance strategy: The Hong Kong government has implemented several green finance initiatives, which promotes green bonds and sustainable investment products to help businesses align their financing with ESG objectives. As of 2024, the Hong Kong government has issued approximately HKD 40 billion in green bonds since the launch of its green bond program. Corporations in Hong Kong have collectively issued around HKD 30 billion in green bonds, reflecting a growing trend in sustainable financing. Investments in renewable energy projects supported by green finance initiatives have reached approximately HKD 15 billion. The total assets under management in sustainable investment products in Hong Kong are estimated to be around HKD 800 billion.
Digital reporting tools: Companies like HSBC have adopted advanced data analytics and reporting tools to enhance their ESG disclosures. By leveraging artificial intelligence and blockchain technology, HSBC aims to improve the accuracy and efficiency of its sustainability reporting, making it more accessible to stakeholders.
Case study: A notable example is Hang Seng Bank, which has integrated ESG considerations into its business strategy by committing to net-zero emissions by 2030. The bank has launched several green financing products and initiatives, including green mortgages and loans for sustainable projects, demonstrating a proactive approach to sustainability.
Community initiatives: The Hong Kong government, in collaboration with NGOs and business associations, is actively promoting initiatives to raise awareness about ESG issues and the significance of sustainability reporting. Local NGOs and community groups, such as Greenpeace, have also been vocal about climate concerns, successfully pressuring companies to adopt more sustainable practices, including reducing plastic packaging and improving waste management.
- Hong Kong Climate Action Plan: The government’s Climate Action Plan 2050 outlines key strategies for achieving carbon neutrality, including enhancing energy efficiency and promoting renewable energy sources. This plan serves as a guideline for businesses to align their ESG strategies with national goals.
- Emission reduction targets: Hong Kong aims to achieve a reduction of carbon emissions by 36% from 2005 levels by 2030, with preliminary data showing a reduction of approximately 25% by 2025.
- Renewable energy contribution: The share of renewable energy in Hong Kong's energy mix is projected to reach 30% by 2030, with around 10% achieved by 2025 through investments in solar and wind projects.
- Energy efficiency improvements: The government has implemented energy efficiency measures that are expected to reduce energy consumption in new buildings by 30% compared to 2020 levels.
- Green transport initiatives: The introduction of electric vehicles (EVs) has increased, with EVs making up about 20% of new vehicle registrations by 2025, supported by government incentives and infrastructure development.
- Funding for green projects: The total investment in climate-related projects is estimated to exceed HKD 50 billion by 2025, aimed at enhancing resilience and sustainability.
Here are some key market updates regarding ESG reporting in Hong Kong:
In Hong Kong, the number of listed companies disclosing ESG information has significantly increased. According to the latest figures from the Hong Kong Stock Exchange (HKEX), the ESG disclosure rate for listed companies reached approximately 92% in 2023. This indicates a strong commitment among companies to enhance transparency around their sustainability practices.
Recent statistics show that over 1,500 listed companies in Hong Kong have published ESG reports, reflecting a growing recognition of the importance of sustainability among businesses. This number continues to rise year-on-year, driven by regulatory requirements and investor demand for transparency.
There is a notable increase in investor demand for ESG information in Hong Kong, with a survey by the Hong Kong Investment Funds Association (HKIFA) revealing that 82% of institutional investors prioritize ESG performance in their investment decisions. In response to this trend, companies like CLP Group are enhancing their ESG disclosures to demonstrate their commitment to renewable energy and achieving carbon neutrality by 2050.
With the impending regulatory changes, including mandatory climate-related disclosures, it is anticipated that the number of companies engaging in ESG reporting will continue to grow. The focus is expected to shift towards integrating ESG factors into core business strategies and enhancing stakeholder communication.
These insights highlight a vibrant and evolving ESG landscape in Hong Kong, reflecting a commitment to sustainability that parallels the trends observed in other APAC countries.
The broader impact of ESG initiatives
Beyond compliance and competitive advantage, embracing ESG principles can lead to broader societal benefits. Companies that prioritize sustainability contribute to community well-being, environmental health, and economic resilience. This holistic approach fosters innovation, drives operational efficiencies, and ultimately leads to a more sustainable future.
As the landscape evolves, it presents both challenges and opportunities, and organizations that adapt will be better positioned to thrive in the future.