Hong Kong proposes IFRS-aligned HKFRS sustainability disclosure standards

The Hong Kong Institute of Certified Public Accountants (HKICPA), the sustainability disclosure standard-setter of Hong Kong, is seeking feedback, until October 27, 2024, on the Hong Kong Sustainability Disclosure Standards HKFRS S1 and HKFRS S2. Both standards are expected to be effective for annual reporting periods beginning on or after August 01, 2025.

The proposed HKFRS S1 and HKFRS S2 standards are fully aligned with the standards IFRS S1 and IFRS S2 standards from the International Sustainability Standards Board (ISSB).

• HKFRS S1. The draft standard covers general requirements for disclosure of sustainability-related financial information and requires an entity to disclose information about all sustainability-related risks and opportunities that could reasonably be expected to affect the entity’s cash flows, its access to finance, or cost of capital over the short, medium or long term. These risks and opportunities are collectively referred to as “sustainability-related risks and opportunities that could reasonably be expected to affect the entity’s prospects.” This draft standard also prescribes how an entity prepares and reports its sustainability-related financial disclosures. It sets out general requirements for the content and presentation of those disclosures so that the information disclosed is useful to primary users in making decisions relating to providing resources to the entity.

• HKFRS S2. The draft standard addresses climate-related disclosures and is part of the industry-based guidance on implementing IFRS S2 climate-related disclosures. The guidance suggests possible ways to apply some of the disclosure requirements in IFRS S2 but does not create additional requirements. It suggests possible ways to identify, measure and disclose information about climate-related risks and opportunities that are associated with particular business models, economic activities, and other common features that characterize participation in the industry. The guidance has been derived from Sustainability Accounting Standards Board (SASB) Standards, which are maintained by the International Sustainability Standards Board (ISSB). The metric codes used in SASB Standards have been included for ease of reference.

Both standards will be applicable for publicly accountable enterprises, including listed entities, and regulated financial institutions in Hong Kong such as banks, fund managers, insurance companies and Mandatory Provident Fund trustees. The Institute also prepared an Explanatory Memorandum that explains the history of development of the Hong Kong Exposure Drafts, the reasons for full convergence with IFRS S1 and S2, the consultation questions, and next steps. HKICPA aims to publish the final HKFRS S1 and S2 by the end of 2024, subject to undergoing the Institute’s standard-setting due process, which includes an analysis of comments received on the Hong Kong Exposure Drafts.

Related links

• Press release

• Exposure drafts (PDF)

• Explanatory memorandum (PDF)