Hong Kong SAR: Current status on ISSB implementation (IFRS S1 + S2) — what’s moved, what’s next

Sustainability reporting in Hong Kong SAR is moving from a stand-alone “ESG report” mindset to a more investor-grade disclosure model (similar to traditional financial figures based disclosure and audit requirements...) aligned with the International Sustainability Standards Board (ISSB).

The main references are IFRS S1 (general sustainability-related financial disclosures) and IFRS S2 (climate-related disclosures). Together, they ask companies to explain—clearly and consistently—how sustainability and climate risks and opportunities could affect enterprise value, and how governance, strategy, risk management, and metrics/targets are set up to manage those effects.

Where Hong Kong SAR is right now with ISSB implementation?

Hong Kong’s progress is best described as alignment and mobilisation, with ISSB (IFRS S1 and S2) increasingly treated as the destination state for capital-market sustainability disclosure.

Rather than a single legislative switch-over, implementation is emerging through (a) listed-issuer disclosure obligations and guidance that shape market practice, and (b) local standard-setting alignment intended to keep Hong Kong issuers interoperable with the ISSB global baseline.

For issuers, the practical implication is simple: IFRS S1/S2 are not “extra ESG pages.” They are a disclosure system built for investors. (don't view it as a compliance homework click and submit exercise anymore...)

The change is mainly about decision-useful clarity:

what is material, what is governed, what is measured, and how it links back to financial performance and position.

As of February 2026, Hong Kong SAR is in the advanced implementation phase of ISSB adoption, with a clear roadmap and binding timelines:

• Adoption commitment: Hong Kong is among the first jurisdictions to commit to fully adopting ISSB Standards (IFRS S1 and S2).

• Local standards issued: The HKICPA published HKFRS S1 and S2, fully aligned with ISSB, effective 1 August 2025.

• Phased implementation:

  • 2025: Main Board issuers disclose climate information aligned with IFRS S2 on a “comply or explain” basis.

  • 2026: Large-cap issuers move to mandatory climate disclosures.

  • By 2028: Large publicly accountable entities (PAEs) must fully adopt the Hong Kong (ISSB‑aligned) Standards.

  
  

Overall, Hong Kong has moved from policy commitment to active, mandatory rollout, positioning itself as a leading ISSB‑aligned sustainability reporting hub in Asia Pacific.

The practical channels of implementation (who drives what)

HKEX remains the core market lever for listed companies. Its ESG framework has already pushed issuers toward structured disclosure and stronger board accountability, forming the backbone on which ISSB-aligned reporting can be layered (HKEX, 2020).

In parallel, Hong Kong’s reporting ecosystem is preparing for a world where sustainability information is expected to be repeatable, comparable, and assurance-ready, reflecting ISSB’s objective of a global baseline for capital markets (IFRS Foundation, 2023a).

What “progress” looks like inside companies

Even before ISSB-style reporting is universal, many Hong Kong listed companies—especially large caps and internationally exposed groups—have started to operationalise S1/S2 in a few visible ways:

• Governance upgrades: clearer board oversight of sustainability/climate, management accountability, and escalation routes.

• Materiality discipline (S1): shifting from broad stakeholder lists to a defensible view of what could affect enterprise value, with documented judgments.

• Climate data build-out (S2): improving Scope 1 and Scope 2 inventories, and beginning to tackle Scope 3 with better boundary definitions and estimation methods

• Risk and finance connectivity: integrating climate and sustainability into ERM, capital allocation, and narratives around impacts on costs, revenues, capex, and financing terms.

This is also consistent with global momentum behind ISSB adoption and use in capital markets (IOSCO, 2023).

The hardest gaps still slowing adoption

In Hong Kong, the most common friction points track what many markets face:

• Scope 3 emissions and value-chain data (S2): supplier coverage, data quality, and calculation method choices. (especially when you value chain involved a lot of SME firms...)

• Scenario analysis maturity (S2): many companies can list “risks,” but fewer can show structured analysis that is decision-relevant.

• Controls and assurance readiness: sustainability information often lacks the audit trail and control environment expected for capital-market reporting.

• Consistency across reports: misalignment between sustainability disclosures, annual report narratives, and assumptions embedded in financial statements.

What to do next?

If you are preparing a Hong Kong listed issuer (or a large private group reporting to investors), the fastest way to move from general ESG reporting to ISSB-style disclosure is to focus on a few building blocks:

1. Map your current disclosures to IFRS S1/S2 across governance, strategy, risk management, and metrics/targets (mapping exercise)

2. Lock down materiality (S1): document judgments, inputs, thresholds, and board/management sign-off.

3. Strengthen climate metrics first (S2): clean up Scope 1/2 boundaries, prioritise relevant Scope 3 categories, and tighten target definitions

4. Build reporting-grade controls: named owners, evidence retention, documented calculations, change approvals.

5. Plan for assurance early: internal testing now reduces first-year surprises and helps boards gain confidence.

Additional reading:

AFRC Consults on Sustainability Assurance in Hong Kong (Dec 2025) - Key Takeaways

https://www.ecovision.com.hk/post/afrc-consults-on-sustainability-assurance-in-hong-kong-dec-2025-key-takeaways

Closing thought

Hong Kong SAR’s ISSB path is, at its core, a shift in reporting quality and comparability. IFRS S1 supplies the disclosure architecture; IFRS S2 turns climate into investor-grade, decision-relevant information.

Companies that treat S1/S2 as part of mainstream reporting—connected to strategy, risk, and finance—tend to progress faster than those who treat it as an extended ESG questionnaire.

References & additional readings

1. https://www.ifrs.org/content/dam/ifrs/publications/pdf-standards-issb/english/2023/issued/part-a/issb-2023-a-ifrs-s1-general-requirements-for-disclosure-of-sustainability-related-financial-information.pdf?bypass=on

2. https://www.ifrs.org/content/dam/ifrs/publications/pdf-standards-issb/english/2023/issued/part-a/issb-2023-a-ifrs-s2-climate-related-disclosures.pdf?bypass=on

3. https://www.hkex.com.hk/Listing/Sustainability/ESG-Academy/ESG-in-Practice?sc_lang=en

4. https://www.hkex.com.hk/Listing/Sustainability/ESG-Academy/Rules-and-Regulations?sc_lang=en

5. https://www.hkexgroup.com/About-HKEX/About-HKEX/Our-Sustainability-Journey/Regulator?sc_lang=en

6. https://www.iosco.org/news/pdf/IOSCONEWS703.pdf

7. https://en-rules.hkex.com.hk/rulebook/environmental-social-and-governance-reporting-guide-and-related-gem-listing-rules

8. https://www.fsb-tcfd.org

9. https://www.hkicpa.org.hk/-/media/HKICPA-Website/Members-Handbook/volumeIV/319s2.pdf

10. https://www.hkicpa.org.hk/-/media/HKICPA-Website/Members-Handbook/volumeIV/319s1.pdf