HKEX’s New ESG Requirements: Focus on Climate Disclosure and Scope 3 Emissions

Investors globally are pressing companies for greater transparency on climate risks and sustainability. In response, the Hong Kong Stock Exchange (HKEX) has raised the bar for ESG reporting. Effective January 2025, HKEX is introducing enhanced climate-related disclosure rules that closely align with the new ISSB IFRS S2 standard. These rules will push Hong Kong-listed companies to disclose more robust information on climate risks, opportunities, and greenhouse gas (GHG) emissions – including the often elusive Scope 3 emissions from their value chains.

Climate-Related Disclosures Aligned with Global Standards

HKEX’s updated ESG requirements bring local reporting in line with global frameworks like the Task Force on Climate-related Financial Disclosures (TCFD). Companies will need to report under TCFD’s four pillars – Governance, Strategy, Risk Management, and Metrics & Targets – providing a clear view of how climate issues are overseen, integrated into strategy, managed, and measured. This means disclosing the board’s oversight of climate matters, the company’s strategy for managing climate risks and opportunities (including use of scenario analysis), the processes for identifying and managing climate-related risks, and the metrics and targets used to track progress (such as carbon emission metrics and reduction goals).

Notably, mandatory GHG emissions reporting is being phased in. All listed companies must disclose their Scope 1 and Scope 2 emissions (direct emissions and energy indirect emissions) starting with 2025 reports. HKEX is also putting Scope 3 emissions (indirect emissions from the value chain) in the spotlight – initially on a “comply or explain” basis, and set to become mandatory for large-cap and main-board companies by 2026. This tightening of expectations reflects HKEX’s commitment to meet international best practices; in fact, Hong Kong’s roadmap indicates that reporting fully in line with ISSB Sustainability Disclosure Standards (IFRS S1 and S2) will ultimately be required. In short, climate disclosure is no longer optional or high-level – it’s moving toward detailed, TCFD-aligned reporting as the new normal.

Spotlight on Scope 3 Emissions Inventory

One of the biggest changes – and challenges – for Hong Kong issuers is tackling Scope 3 GHG emissions. For many companies, Scope 3 (emissions from sources like suppliers, product use, business travel, investments, etc.) constitutes the largest portion of their carbon footprint. HKEX’s new ESG code expects companies to start accounting for these value-chain emissions, which were previously often omitted. Large companies in particular will be expected to measure and report Scope 3 emissions in the next couple of years. Others are encouraged to begin collecting Scope 3 data now, even if full disclosure is not immediately mandatory. This shift signals that regulators and investors want a more complete picture of corporate climate impact, well beyond the factory gates or office walls.

However, building a Scope 3 emissions inventory is no easy task. In a recent Hong Kong workshop, nearly half of ESG and finance professionals surveyed admitted feeling “fairly unprepared” for the coming climate disclosure requirements. A chief hurdle is data collection: gathering reliable emissions data across an entire supply chain can be daunting. Complex, global supplier networks lead to gaps and inconsistencies in data, making Scope 3 calculations challenging for even the most committed companies. Despite these difficulties, the direction is clear – companies must improve their Scope 3 tracking capabilities to meet stakeholder expectations and HKEX’s evolving standards.

How TÜV Rheinland Can Help Hong Kong-Listed Companies

Adapting to these new ESG requirements may seem overwhelming, but you don’t have to navigate it alone. TÜV Rheinland Hong Kong’s ESG advisory team supports listed companies in meeting HKEX’s enhanced expectations, especially in the critical areas of Scope 3 emissions, climate risk analysis, and reporting readiness. Key services include:

• Scope 3 Data Collection & Verification: Assisting in quantifying your value-chain emissions by engaging suppliers and validating data. TÜV Rheinland provides comprehensive Scope 1, 2, and 3 GHG inventory verification, and even offers a carbon emission data management platform to streamline the entire process – from data gathering and calculation to review and report generation. This ensures that your Scope 3 emissions calculations are credible and ready for disclosure.
• Climate Risk Assessment & Scenario Analysis: Helping you identify and evaluate climate-related risks and opportunities. TÜV Rheinland offers climate risk assessment services aligned with TCFD recommendations, guiding companies through scenario analysis and climate risk quantification. This means you can assess physical risks (like extreme weather) and transition risks (like regulatory changes) under different climate scenarios, and understand their potential financial impacts. The result is stronger climate strategy and resilience planning, grounded in globally accepted methodologies.
• ESG Reporting Readiness & Assurance: Preparing your organization to confidently report under the new HKEX ESG framework. This includes performing ESG gap analyses against the latest requirements, developing robust reporting strategies, and ensuring your disclosures align with ISSB/TCFD standards. TÜV Rheinland also provides independent third-party assurance and verification for sustainability reports, enhancing the credibility of your ESG disclosures. From training your team on best practices to verifying the final report, our experts help you deliver a report that meets regulatory expectations and investor scrutiny.

Call to Action: The countdown to HKEX’s new ESG disclosure regime has begun – now is the time to act. Strengthening your Scope 3 data and climate disclosures will not only ensure compliance, but also earn trust from investors and stakeholders. Get ahead of the curve. Contact TÜV Rheinland Hong Kong’s ESG advisory team today to discuss how we can support your company in meeting these new ESG challenges and turning compliance into opportunity.