HONG KONG SAR, CHINA Law and Practice Contributed by: Vincent Lung and Mike Yeung, Parkside Chambers
Effective oversight usually includes: • sanctions screening; • contractual controls; • counterparty due diligence; • escalation procedures; • legal review of high-risk transactions; • staff training; and • periodic testing of controls. Disclosure
The requirements are being phased in. HKEX materials state that Large Cap issuers are subject to mandatory disclosure for certain climate requirements from finan - cial years commencing on or after 1 January 2026, while other Main Board issuers are initially subject to “comply or explain” requirements and GEM issuers to voluntary disclosure. ISSB Alignment Hong Kong is moving towards sustainability disclosure aligned with the International Sustainability Standards Board. The Government’s Roadmap on Sustainability Disclosure indicates a pathway for publicly account - able entities to adopt ISSB-aligned standards, with Hong Kong sustainability disclosure standards hav - ing an effective date of 1 August 2025 for voluntary application. Board Responsibility ESG reporting is not simply a communications exer - cise. The board must oversee ESG risks and oppor - tunities, determine materiality, supervise internal con - trols and ensure that public statements are supported by evidence. A listed company should therefore connect ESG reporting with strategy, risk management, financial planning and disclosure controls. 7.2 ESG Developments Continued Direction of Travel Hong Kong has not materially retreated from ESG reporting despite global debate around ESG. The direction remains towards more structured, investor- focused and internationally aligned sustainability dis - closure. The strongest shift is from broad ESG narrative to more specific disclosure on climate risk, governance, metrics and financial impact. Companies are expected to provide information that investors can use, rather than general statements of commitment. Climate and Data Quality Climate is the fastest-moving component. Companies need better systems for greenhouse gas data, climate risk assessment, scenario analysis, transition planning and internal controls.
For listed companies, geopolitical or sanctions risks may need to be disclosed if material. Disclosure may be required in financial reports, risk factor sections, announcements or transaction documents. The board should ensure that disclosure is accurate, balanced and not misleading. Understatement of geo - political exposure can create investor, regulatory and reputational risk.
7. Environmental, Social and Governance 7.1 ESG Requirements Listed Company ESG Reporting
Hong Kong listed companies must publish ESG reports under the ESG Reporting Code. ESG reporting covers environmental, social and governance matters, including board oversight, materiality, stakeholder engagement and specific ESG indicators. The ESG regime applies to listed companies. Private companies are not generally subject to the same public ESG reporting requirements unless required by contract, financing arrangements, group policy or sector-specific regulation. Climate Reporting Climate reporting is now the most significant area of ESG development. HK Stock Exchange introduced enhanced climate disclosure requirements for finan - cial years beginning on or after 1 January 2025. These requirements are structured around governance, strat - egy, risk management, and metrics and targets.
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