HKEX's climate disclosure rules will force Hong Kong firms to seek solutions for greenhouse gas emissions: PwC
Companies in Hong Kong will need to "know their greenhouse gas emissions" and "look for solutions" to meet the stock exchange's tightening climate disclosure requirements, according to accounting firm PwC.
Businesses have been urged to take immediate action on emissions after bourse operator Hong Kong Exchanges and Clearing (HKEX) ended a consultation on Friday to make climate-related disclosures mandatory and align them with international standards as early as January next year.
Climate change has become increasingly important for companies to consider their impact on the environment, and a key aspect is understanding their greenhouse gas emissions, according to Low Lit-Ping, Asia-Pacific climate change lead partner at PwC Hong Kong, speaking at the consultancy's environmental, social and governance event on Tuesday.
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"Companies need to know where their greenhouse gas emissions are in order to look for the solution," said Low. "You can only manage what you can measure."
(From left) PwC executives Andy Law, Loretta Fong and Low Lit-Ping at the accounting firm's ESG media roundtable in Hong Kong on Tuesday. Photo: Yik Yeung-man alt=(From left) PwC executives Andy Law, Loretta Fong and Low Lit-Ping at the accounting firm's ESG media roundtable in Hong Kong on Tuesday. Photo: Yik Yeung-man>
Small and medium-sized enterprises (SMEs) can learn from the practices of first-movers in their industry in decarbonising their operations, as well as those of their competitors, she said, adding that government policies would also benefit SMEs.
"Companies don't need to start from scratch. There are many examples they can take reference from, whether from Hong Kong or internationally," said Low.
During a three-month consultation, HKEX sought market feedback on enhancing climate-related disclosures under its ESG framework, including making such disclosures mandatory, as opposed to the current "comply or explain" basis.
Under the HKEX proposal, there would be a two-year transition period before firms are required to disclose their scope 3 emissions as well as conduct climate scenario analysis. Scope 3 emissions are those attributable to suppliers and customers.
"The measurement of scope 3 emissions and scenario analysis will take time. Even with the transition period, we believe many companies need to start now," said Low.
The transition period would allow for companies to compare data to gauge their improvement, said Andy Law, associate director of climate and sustainability at PwC Hong Kong, speaking at the same event.
"These two areas will involve more data, so the quality of data measurement will take time to mature. The transition period will help companies prepare."
The government could also consider subsidies for different sectors to decarbonise their operations, said Loretta Fong, ESG services leader at PwC Hong Kong and Greater Bay Area.
The HKEX's new disclosure requirements would be introduced in alignment with climate standards from the International Sustainability Standards Board (ISSB), which was set up during the COP26 global climate summit in Glasgow in 2021 to consolidate various reporting standards. The ISSB released its finalised standards on June 26.
The ISSB standards leverage off requirements by the Task Force on Climate-Related Financial Disclosures (TCFD), set up by the Basel-based Financial Stability Board in 2015 to develop guidelines for voluntary climate-related financial disclosures across industries, but include specificity and granularity, said Yvonne Kam, corporate reporting services partner at PwC China in a separate interview.
All jurisdictions can use the global baseline and build their own specific requirements, said Kam. "Companies should waste no time before embarking on this journey."
Hong Kong's Green and Sustainable Finance Cross-Agency Steering Group, led by the Hong Kong Monetary Authority and the Securities and Futures Commission, announced in July 2021 that it aims for mandatory TCFD-aligned climate-related disclosures by 2025.
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