by Mike Bascombe

Hong Kong IFRS adoption

Hong Kong's decision to mandate climate disclosure under the IFRS starting 2025 boosts transparency and accountability in financial and sustainability reporting, aligning the city with global norms and highlighting the rising significance of environmental factors in financial disclosures.

← Back to all blog posts

Hong Kong IFRS adoption

Hong Kong's recent move to require climate disclosure based on the International Financial Reporting Standards (IFRS) from 2025 marks a significant step towards enhanced transparency and accountability in financial and sustainability reporting. This initiative aligns Hong Kong with global practices and underlines the increasing importance of environmental considerations in financial disclosures.

What changes?

The introduction of IFRS-based climate disclosure mandates will transform how companies report on climate-related risks and opportunities. Businesses will need to integrate climate risk assessments into their financial statements, offering a clearer picture of their environmental impact and resilience to climate variability. This change will provide investors with better information to make informed decisions, likely influencing capital allocation towards more sustainable practices.

Who will it affect?

The new reporting requirements will impact listed companies and large private entities in Hong Kong, encompassing sectors from finance to manufacturing. This will require significant adjustments from CFOs and sustainability teams, who must ensure their reporting systems are compliant with the new standards. Additionally, auditors and financial analysts will need to adapt to these changes, developing new skills to interpret and verify climate-related information effectively.

Global adoption of IFRS

Globally, many regions including the European Union, Australia, and Canada have moved towards IFRS for financial reporting, with several adopting specific IFRS standards for sustainability reporting. The global shift towards standardised financial reporting frameworks helps enhance comparability among businesses internationally, facilitating easier access to global markets.

Actionable steps for finance and sustainability teams

In light of these changes, finance and sustainability teams should take proactive steps:

1. Training and development: Teams must be educated on IFRS standards and the specifics of climate-related disclosures.

2. Systems integration: Integrating new reporting requirements into existing financial systems will be crucial. This may involve upgrading IT systems or adopting new software to handle the required data collection and analysis.

3. Stakeholder engagement: Communicating with stakeholders about how these changes will affect the company’s reporting and operations is vital. This includes engaging investors, regulators, and internal staff to align on expectations and responsibilities.

4. Continuous monitoring: Staying updated with any amendments in reporting standards and adjusting practices accordingly will be necessary to maintain compliance and leverage reporting for strategic decision-making.

The shift to mandatory IFRS-based climate disclosure in Hong Kong is more than a regulatory update; it is a strategic business opportunity to embrace sustainability and transparency, driving long-term value creation for all stakeholders.