Environmental, Social, and Governance (ESG) reporting in Hong Kong has undergone its most significant transformation in a decade. In April 2024, HKEX published its Consultation Conclusions on Enhancement of Climate-related Disclosures, introducing the New Climate Requirements as Part D of the ESG Reporting Code (the "ESG Code") — renamed from the former ESG Reporting Guide. These requirements took effect for financial years commencing on or after 1 January 2025 and are closely aligned with the IFRS S2 Climate-related Disclosures published by the International Sustainability Standards Board (ISSB), replacing the earlier TCFD framework.
From January 2026 onwards, the requirements enter their next phase, with Hang Seng Composite LargeCap Index constituents facing mandatory disclosure of all climate-related provisions. This article provides a complete overview of the 2026 landscape, the phase-in timeline, and practical guidance for compliance.
Phase-In Implementation Timeline
HKEX adopted a phased approach to implementation, with obligations varying by issuer type:
| Issuer Type | Scope 1 & 2 GHG Emissions | Other Climate Requirements (incl. Scope 3) |
|---|---|---|
| Main Board issuers | Mandatory from 1 Jan 2025 | Comply or explain from 1 Jan 2025 |
| LargeCap issuers (HSCLI constituents) | Mandatory from 1 Jan 2025 | Comply or explain from 1 Jan 2025; Mandatory from 1 Jan 2026 |
| GEM issuers | Mandatory from 1 Jan 2025 | Voluntary (encouraged) |
The first ESG reports applying the New Climate Requirements on a comply or explain basis are expected in 2026 (for December 2025 year-end entities). The first mandatory disclosures by LargeCap issuers will follow in 2027 for the 2026 financial year. Once an issuer becomes subject to mandatory disclosure, it must continue to comply even if it subsequently ceases to be an HSCLI constituent.
The Four Pillars of Part D (New Climate Requirements)
The New Climate Requirements under Part D of the ESG Code mirror the ISSB structure across four core pillars:
1. Governance
Issuers must disclose the governance body(s) or individual(s) responsible for oversight of climate-related risks and opportunities. This includes the board's role in overseeing strategy, risk management policies, and progress against targets. For financial years commencing on or after 1 January 2025, issuers shall disclose additional information about their governance structure, processes, controls and procedures for managing climate-related risks and opportunities. Where ESG and climate oversight is managed on an integrated basis, an integrated governance disclosure is expected to avoid unnecessary duplication.
2. Strategy
Issuers must disclose climate-related risks and opportunities that could reasonably be expected to affect the entity's business model, strategy, cash flows, access to finance, or cost of capital over the short, medium, and long term. This includes:
- Description of climate-related risks and opportunities identified
- Impact on the business model and value chain
- Resilience of the strategy, taking into consideration different climate-related scenarios (scenario analysis)
- Transition plans, if any
3. Risk Management
Issuers must describe their processes for identifying, assessing, prioritising, and monitoring climate-related risks, including how these processes are integrated into the entity's overall risk management framework.
4. Metrics and Targets
Issuers must disclose:
- Scope 1, Scope 2, and Scope 3 GHG emissions — measured in accordance with the GHG Protocol (Scope 3 on a comply or explain basis for Main Board issuers from 2025, mandatory for LargeCap from 2026)
- Climate-related transition risks — the amount and percentage of assets or business activities vulnerable to transition risks
- Climate-related physical risks — the amount and percentage of assets or business activities vulnerable to physical risks
- Capital deployment — the amount of capital expenditure, financing, or investment deployed towards climate-related risks and opportunities
- Internal carbon prices — if used, and how they inform decision-making
- Climate-related targets — including targets for GHG emission reductions, with details of scope, timeline, and methodology
HKFRS Sustainability Disclosure Standards
On 12 December 2024, the Hong Kong Institute of Certified Public Accountants (HKICPA) published the HKFRS S1 General Requirements for Disclosure of Sustainability-related Financial Information and HKFRS S2 Climate-related Disclosures (collectively the HKFRS Sustainability Disclosure Standards). These standards are fully aligned with the ISSB Standards and are available for voluntary application from their effective date of 1 August 2025.
HKEX encourages early adoption. ESG reports prepared in compliance with the ISSB Standards are deemed to have complied with the New Climate Requirements under Part D of the ESG Code. In September 2025, HKEX published a linkage document providing practical guidance for issuers choosing to report under the ISSB Standards.
Hong Kong's Roadmap: Full ISSB Adoption by 2028
The Hong Kong SAR Government published the Roadmap on Sustainability Disclosures in Hong Kong (December 2024), setting out a clear pathway towards mandatory sustainability reporting for all publicly accountable entities (PAEs):
- 2025–2026: HKEX New Climate Requirements phase-in (interim step based on IFRS S2)
- 2027: HKEX to consult the market on mandating sustainability reporting in accordance with the Hong Kong Sustainability Disclosure Standards (HKSDS, aligned with ISSB) for listed PAEs, including the approach to phasing-in assurance requirements
- 2028: Expected effective date for the first batch of listed companies to apply the HKSDS on a mandatory basis
Other regulated financial institutions (banks, insurers, MPF trustees) are also expected to adopt ISSB-aligned standards on timelines set by their respective regulators (HKMA, IA, MPFA).
Sustainability Assurance on the Horizon
The Roadmap also signals that assurance of sustainability disclosures will become mandatory in due course. The Accounting and Financial Reporting Council released a proposed local regulatory framework for sustainability assurance for public consultation in 2025. HKEX plans to consult the market in 2027 on mandating assurance for all or part of the sustainability disclosures, with a phasing-in approach for different issuer types.
Best Practices for 2026 and Beyond
- Establish a board-level ESG/sustainability committee with clear terms of reference and regular reporting cadence
- Conduct a climate-related scenario analysis to test strategic resilience under different warming scenarios (e.g. 1.5°C and 3°C+), as expected by Part D
- Measure and report Scope 3 emissions — this remains the most challenging area; start with the largest categories (purchased goods, downstream use, investments)
- Set science-based targets aligned with the Paris Agreement, validated by the Science Based Targets initiative (SBTi) where possible
- Integrate climate risk into enterprise risk management — not as a standalone exercise
- Obtain independent limited assurance on GHG emissions data now, ahead of mandatory assurance requirements expected post-2027
- Prepare for dual reporting — the ESG Code and the future HKSDS may co-exist during a transition period, meaning some issuers will need to report under both frameworks
- Engage stakeholders regularly to understand evolving expectations on climate and broader ESG issues
Source: HKEX Consultation Conclusions on Enhancement of Climate-related Disclosures (April 2024); HKEX Implementation Guidance for the New Climate Requirements (2024); HKFRS Sustainability Disclosure Standards, HKICPA (August 2025); Roadmap on Sustainability Disclosures in Hong Kong, FSTB (December 2024). HKEX ESG Academy