Introduction

In a significant move towards enhancing climate risk disclosures, the Hong Kong Institute of Certified Public Accountants (HKICPA) has announced its initiative to develop localized greenhouse gas emission calculation references and climate scenario projections specifically for Hong Kong-listed companies. This decision stems from feedback gathered during various training workshops held for corporate officers on the critical topic of climate-risk disclosures, as reported by the South China Morning Post.

Current State of Emission Data

Currently, many companies listed in Hong Kong rely heavily on emission factors provided by international entities, including agencies from the United States, United Kingdom, and the United Nations’ Intergovernmental Panel on Climate Change. However, Cecilia Kwei, head of accounting and sustainability standard-setting at HKICPA, emphasized at the ReThink HK sustainable business forum that there is a pressing need for localized data. “Participants kept reiterating that they need more Hong Kong-specific greenhouse gas emission factors so that they don’t have to use [overseas references]… and climate [risk] scenarios,” said Kwei.

Importance of Localized Data

The development of localized data is expected to be exceptionally beneficial for conducting scenario analyses, particularly concerning storms and flood risks. This underscores the importance of collaboration between governmental bodies and businesses to create a robust framework that addresses the unique climatic challenges faced by Hong Kong.

Mandatory Disclosure Requirements

Starting in 2025, Hong Kong Exchanges and Clearing (HKEX) has mandated that the largest listed companies disclose their greenhouse gas emissions from operations and purchased energy. This requirement will be expanded in 2026 to include emissions linked to supply chain partners, along with the obligation to perform scenario analyses and report on their climate resilience.

Moving Away from Proxy Data

While HKEX currently permits the use of proxy data from other regions in the absence of specific local data, the push for tailored emissions factors aims to eliminate this reliance on external references. Notably, Kwei also highlighted that China is in the process of developing emission factors for around 100 products by 2027, with plans to expand this to 200 by 2030, signaling a broader regional effort towards standardized emissions tracking.

Alignment with International Standards

In collaboration with financial authorities, the HKICPA is gearing up to release Hong Kong's sustainability disclosure standards, ensuring alignment with the guidelines established by the International Sustainability Standards Board (ISSB). The ultimate incorporation of these standards into local regulations will depend on regulatory bodies across Hong Kong’s banking, securities, and stock market.

International Cooperation

Earlier in the year, the Institute of Singapore Chartered Accountants (ISCA) entered a memorandum of understanding with HKICPA, marking a step towards enhanced international cooperation and creating new opportunities within the accountancy sector across the Asia-Pacific region. This proactive approach is indicative of a trend where organizations are recognizing the urgent need for tailored solutions in the fight against climate change.