New Hong Kong Sustainability Disclosure Standards

Why should I read this?

Since August 2025, businesses in Hong Kong can voluntarily adopt two new sustainability reporting standards: the ‘General Requirements for Disclosure of Sustainability-related Financial Information’ and the ‘Climate-related Disclosures’ (HKFRS SDS). These standards align with the International Sustainability Standards Board (ISSB) global framework and are expected to become mandatory by 2028.

Hong Kong has joined over 35 jurisdictions in adopting the ISSB standards, including the UK, China, Singapore, and Jordan. This strategic alignment reinforces Hong Kong’s position as a leading global financial centre, enhancing investor confidence and promoting consistency in sustainability reporting. International businesses stand to benefit from reduced duplication and greater comparability across markets. Overall, this development marks a major step forward in corporate transparency and accountability.

Current disclosure requirements and expected timeline for HKFRS SDS

While HKFRS SDS remains voluntary, Hong Kong Stock Exchange (HKEX) listed businesses are required to comply with current Hong Kong Listing Rules, including the New Climate Requirements introduced in January 2025. These rules support early climate reporting and facilitate alignment with ISSB Standards ahead of full adoption. From January 2026, Large Cap Issuers will be mandated to report under these requirements, marking a significant step toward stronger climate disclosures. The requirements act as a transitional bridge to HKFRS SDS, with a formal consultation planned for 2027 to consider its full replacement.

In line with ISSB Standards, Hong Kong will prioritise application of HKFRS SDS to publicly accountable entities (PAEs). As set out by the ISSB, PAEs are:

• entities whose securities are traded in a public market or entities in the process of issuing securities for trading in a public market
• entities that hold assets in a fiduciary capacity for a broad group of outsiders as one of their primary businesses and have a significant weight in the jurisdiction, regardless of their ownership structure or listed status.

The implementation of the HKDRS SDS will follow a phased approach. The below table sets out the application and expected timeline of requirements for PAEs as suggested in the roadmap launched by the Hong Kong Government in December 2024.

Type	Description	Expected Timeline
Large Cap Issuers	Issuers that are Hang Seng Composite Large Cap Index constituents	No later than 2028 subject to amendments to the Listing Rules
Large Non-listed PAEs	Non-listed financial institutions with significant market weight	By 2028 following sector-specific consultations
Other Listed PAEs	Businesses listed HKEX that do not fall within the Hang Seng Composite Large Cap Index	Uncertain, however it is subject to consultation in 2027

 

Although HKFRS SDS aligns with IFRS S1 and S2, future ISSB standards will be reviewed separately and each new standard will go through its own consultation process.

What do these changes mean and should you get ahead?

In 2024, the volume of green and sustainable bonds arranged in Hong Kong reached approximately USD 43.1 billion, accounting for around 45% of the region’s total. Hong Kong has ranked first in the Asian green bond market for seven consecutive years according to the International Capital Market Association. Around 80% of such issuances in Hong Kong were by private sector issuers, with financial institutions taking up around one-third of the market. From a financing perspective, better data disclosure helps prevent greenwashing, enhances the ability to build creditworthiness, and improves access to financial markets and more favourable financing terms from green banks.

Hong Kong has made a decisive move in sustainability reporting through the adoption of HKFRS SDS, underscoring its commitment to global standards. This alignment positions Hong Kong within a growing global movement towards consistent ESG disclosures. This shift embraces transparency and reduces barriers for businesses operating across borders.

International businesses entering the Hong Kong market may find it easier to meet local expectations, while Hong Kong-based businesses expanding internationally will benefit from greater regulatory compatibility.

Businesses should also be mindful of the practical challenges associated with this transition. The new standards introduce heightened data and governance demands that may place pressure on internal resources. This includes the requirement to navigate materiality assessments and provide forward-looking disclosures. As such, early adoption of HKFRS SDS could give businesses a strategic edge, providing additional time to align data collection and reporting processes.

Co-authored by Nathan Handoll and Clare Johnston (Knowledge)