Hong Kong – Climate change reporting is an imminent trending issue on the agenda of various stakeholders across different industries as it has a direct commercial impact on businesses. Regulators and investors are demanding increased transparency on how businesses address climate-related issues. This has resulted in the development of several climate-related disclosure frameworks, including the recommendations released by the Task Force on Climate-Related Financial Disclosures (TCFD) in 2017. Subsequently, the International Sustainability Standards Board (ISSB Board) was established in November 2021, with an initial focus on climate-related financial disclosures.
On 31 March 2022, the ISSB Board released proposals for its first two standards, one dealing with general sustainability-related disclosure requirements and the other on climate-related disclosure requirements. These two proposals built upon the TCFD recommendations and are structured around the four pillars that represent core elements of how companies operate, namely: governance, strategy, risk management, as well as metrics and targets. The ISSB Board expects to finalise the two standards by the end of 2022.
On 12 July 2022, The Institute published a joint report with KPMG China and CLP Holdings Limited (CLP) titled “Climate Change Reporting: Imminent, Challenging & Mandatory – The Opening Moves” (The Report) to help companies anticipate issues in adopting the inevitable ISSB Board’s standards. This publication will explore the focus areas which may warrant additional attention and resources, together with recommendations about how companies can make their opening moves by identifying five focus areas relating to the adoption of the imminent climate reporting regime by the ISSB Board, including:
- Adopting the ‘Enterprise Value’ approach to materiality
- Quantifying the current and anticipated financial effects of climate issues
- Conducting climate-related scenario analysis
- Formulating the climate transition plan and setting the targets
- Determining and reporting on the metrics, such as scope 3 emissions
As governance professionals play a vital role in providing advice and direction on emerging climate reporting requirements and assisting the board in taking the actions to meet those requirements, they must take into account areas of the regiment that are either different from or not fully aligned with the HKEX’s ESG Reporting Guide and may therefore be relatively new to companies in Hong Kong. Regardless of difficulties in implementation, climate change reporting is pressing ahead as it helps drive business performance and create resilience. The Report intends to provide thought leadership from the applied governance perspective on this top of the agenda global issue. The time for action on climate change reporting will be imminent, challenging and likely, mandatory in the foreseeable future.
To view the Report in English, please click HERE.
To view the Report in Chinese, please click HERE.
To view the press release in English, please click HERE.
To view the press release in Traditional Chinese, please click HERE.
To view the press release in Simplified Chinese, please click HERE.