ESG development in HK 2024

In 2024, Hong Kong has made significant strides in the development of Environmental, Social, and Governance (ESG) frameworks, reflecting a growing commitment to sustainability and responsible business practices. Here are the key developments:

Regulatory Framework Enhancements
1.    Alignment with ISSB Standards: 
2.    The Hong Kong Government announced plans to align local sustainability disclosure requirements with the International Sustainability Standards Board (ISSB) Standards. This aims to mandate ISSB-aligned sustainability reporting for listed issuers and regulated financial institutions by 2025 

2. Mandatory ESG Reporting: 
The Hong Kong Stock Exchange (HKEX) has established mandatory ESG disclosure requirements for listed companies, which will be significantly enhanced starting January 1, 2025. This includes mandatory reporting on Scope 1 and Scope 2 greenhouse gas emissions, with larger companies also required to report on Scope 3 emissions 

3. Climate Disclosure Rules: 
The HKEX has finalized climate disclosure requirements based on IFRS S2, which will apply to listed companies in a phased manner. This includes a "comply-or-explain" approach for smaller companies and mandatory requirements for larger firms 

Financial Sector Initiatives
1.Sustainable Finance Promotion:
The Hong Kong government is actively promoting sustainable finance as part of its strategy to position the city as a leading green financial hub. This includes developing frameworks for climate-related financial disclosures and a local taxonomy for sustainable activities

2.Green Financing: 
Financial institutions are encouraged to integrate ESG factors into their investment decisions and provide funding for environmentally friendly projects. This includes issuing green bonds and supporting renewable energy initiatives 

 Corporate Engagement and Compliance
1.Increased Transparency and Accountability
The mandatory ESG reporting requirements are expected to enhance transparency in corporate reporting, allowing stakeholders to better assess companies' environmental impacts and sustainability efforts 

2. Competitive Advantage:                                                                                                              
Companies that prioritize ESG practices are likely to gain a competitive edge, attracting sustainable investment and improving their reputations among stakeholders [[

3. Support for SMEs:                                                                                                                  
The government is also encouraging the use of reporting templates for small and medium-sized enterprises (SMEs) to standardize climate disclosures, which is currently voluntary but aims to enhance overall ESG compliance across sectors 

Conclusion
The developments in ESG frameworks in Hong Kong during 2024 reflect a robust commitment to sustainability, driven by regulatory enhancements, financial sector initiatives, and corporate accountability measures. These efforts are expected to foster a more transparent and responsible business environment, aligning with global sustainability goals.