Hong Kong Climate Disclosure 2026: What LargeCap Issuers Must Report

Under the HKEX rules, a LargeCap issuer is a company that was a Hang Seng Composite LargeCap Index constituent throughout the year immediately before the reporting year. So membership during 2025 determines whether mandatory climate reporting applies for financial year 2026. The lookback is closed. If you were in the index across 2025, the current financial year is your first mandatory one, and the report lands in 2027.

That framing matters because Hong Kong's phasing is easy to misread. Some coverage describes 2025 as the year climate disclosure became mandatory, which is true only for Scope 1 and Scope 2. For everything else, LargeCap issuers spent 2025 on comply-or-explain. The genuine shift to mandatory reporting is happening now, in the year currently underway.

Here is what changes, what you must report, and where the preparation actually bites.

The Phasing, Precisely

HKEX published its consultation conclusions on 19 April 2024, adding Part D to Appendix C2 of the Listing Rules and renaming the framework the Environmental, Social and Governance Reporting Code. Part D is built on IFRS S2, with issuers strongly encouraged to apply the conceptual foundations of IFRS S1, in what Hong Kong describes as a climate-first approach.

Three categories of issuer, three timetables.

Scope 1 and Scope 2 emissions became mandatory for all listed issuers, both Main Board and GEM, for financial years commencing on or after 1 January 2025. This replaced the previous comply-or-explain treatment.

All other Part D climate disclosures, including Scope 3, follow a split. LargeCap issuers report on comply-or-explain for financial years commencing on or after 1 January 2025, and on a mandatory basis for financial years commencing on or after 1 January 2026. Other Main Board issuers remain on comply-or-explain. GEM issuers are voluntary.

So the practical position for a LargeCap issuer with a calendar financial year: your FY2025 report, published this year, covered Scope 1 and 2 as a hard requirement and the rest on comply-or-explain. Your FY2026 report, published next year, must comply in full.

What Full Compliance Actually Means

Part D follows the four pillars familiar from IFRS S2 and the TCFD before it, but the specific paragraph requirements are where the work sits.

Governance. The governance processes, controls and procedures used to monitor, manage and oversee climate-related risks and opportunities. Regulators increasingly expect demonstrable board involvement rather than a described committee structure.

Strategy. Paragraph 20(a) requires disclosure of risks that could reasonably be expected to affect the issuer's cash flows, its access to finance or its cost of capital over the short, medium or long term. Paragraph 21 requires disclosure of the effects on the issuer's business model and value chain, and a description of where in that business model and value chain the risks and opportunities are concentrated. This is the pillar that pushes climate reporting from narrative into financial analysis, and it is where most issuers find their existing ESG report inadequate.

Risk management. The processes used to identify, assess, prioritise and monitor climate-related risks and opportunities, and how those are integrated into overall risk management.

Metrics and targets. Paragraphs 28 to 35 make certain cross-industry metrics mandatory, including greenhouse gas emissions and internal carbon prices. Paragraph 36 requires that the applicability of industry-based metrics, associated with the disclosure topics defined in the IFRS S2 Industry-based Guidance, must be considered.

That last point is worth pausing on. The industry-based guidance is not optional reading. Applicability must be considered and, where relevant, the topics adopted.

HKEX has published Implementation Guidance alongside the rules, incorporating ISSB reporting principles and setting out illustrative examples and step-by-step workflows. For an issuer approaching its first mandatory year, that document is the most practical starting point available.

Scope 3 Is The Real Change

For most LargeCap issuers, Scope 3 is the obligation that turns FY2026 into a substantially harder exercise than FY2025.

The requirement is not simply to produce a number. Issuers must map their emissions against the fifteen categories of the Greenhouse Gas Protocol and provide justification for any exclusions. That means the analysis has to cover the full value chain even where the eventual disclosure does not, because an exclusion has to be reasoned rather than silent.

For financial institutions, financed emissions fall within Scope 3 Category 15, which is its own methodological undertaking and one that asset managers, banks and insurers should not treat as an extension of operational emissions work.

The practical difficulty is the familiar one. Scope 3 data sits with suppliers, customers and portfolio companies who have no obligation to provide it and often no system that produces it in a usable form. HKEX acknowledged this directly during consultation, recognising the difficulty of collecting data from upstream and downstream stakeholders over which issuers have no control.

The Reliefs, And What They Cost

HKEX originally proposed interim provisions in its consultation paper. In the conclusions, those were removed and replaced with a set of reliefs, which is a meaningfully different mechanism.

The reliefs available include reasonable information relief, allowing use of information available without undue cost or effort, capabilities relief aligned to internal resources, commercial sensitivity relief, and relief relating to financial effects disclosures. They extend across areas including identification of climate-related risks and opportunities, determination of the scope of the value chain, use of climate-related scenario analysis, and current and anticipated financial effects. Scope 3 specifically carries reasonable information relief.

The price attached is the part issuers underestimate. When applying a relief, an issuer is expected to provide considered reasons why the specific disclosure requirement could not be complied with, and to provide an action plan indicating when the requirement will be met.

That converts a relief from an exemption into a disclosure obligation of its own. A LargeCap issuer relying on reasonable information relief for several Scope 3 categories will need a documented rationale for each, plus a dated plan for closing the gap. Written properly, that is a more demanding piece of work than many issuers assume, and it is visible to investors and analysts in a way a silent omission would not be.

It also creates a trail. An action plan disclosed in the FY2026 report will be read against the FY2027 report, and unexplained slippage will be noticed.

How This Sits With HKFRS S1 And S2

Two parallel tracks run in Hong Kong, and conflating them is a common error.

The HKEX Listing Rules requirement, described above, is what binds listed issuers today. It is based on IFRS S2 but is a listing rule rather than an accounting standard.

Separately, the Hong Kong Institute of Certified Public Accountants issued HKFRS S1 and HKFRS S2 in December 2024, fully aligned with IFRS S1 and IFRS S2, with an effective date of 1 August 2025. These are the Hong Kong Sustainability Disclosure Standards. They are available for use but are voluntary unless and until a regulator mandates them.

Bridging the two is a cross-government roadmap published on 10 December 2024, which sets out the intention that large publicly accountable entities, starting with large listed companies and financial institutions with significant weight in Hong Kong, will fully adopt the HKFRS Sustainability Disclosure Standards no later than 2028. That extends reporting beyond climate into broader sustainability topics.

For a LargeCap issuer, the sequencing is therefore: mandatory climate reporting under the Listing Rules from FY2026, with full sustainability reporting under HKFRS S1 and S2 arriving by 2028. Building the FY2026 climate disclosure in a way that extends naturally to HKFRS S1 is the sensible approach, because the second deadline is close behind the first.

Banks have a further layer. The Hong Kong Monetary Authority's Supervisory Policy Manual includes a Climate Risk Management module setting expectations for authorised institutions, which are expected to report climate disclosures in line with the TCFD recommendations at a minimum.

Key Preparation Areas

Confirm your status against the lookback. Index membership throughout 2025 determines FY2026 obligations. If you joined the index partway through 2025, check the definition carefully, because the requirement is constituency throughout the year immediately prior.

Close the Scope 3 mapping first. Before worrying about data quality, complete the mapping across all fifteen Greenhouse Gas Protocol categories and decide which are relevant. Exclusions need justification, so the mapping is the foundation for both the disclosure and any relief you claim.

Treat scenario analysis as a build, not a purchase. Part D requires the use of climate-related scenario analysis to assess resilience, with relief available. Issuers who bought a generic scenario report in 2025 will find it does not support the strategy pillar's requirements on cash flows, access to finance and cost of capital.

Get the strategy pillar into financial language. Paragraph 20(a) is written in the vocabulary of financial analysis, not sustainability narrative. That usually requires finance team involvement rather than sustainability team drafting, and it takes longer than expected the first time.

Draft your relief rationales early. If you will rely on reliefs, the reasons and action plans are disclosure content that needs internal review and board comfort. Leaving them to the end of the reporting cycle produces thin, defensive text.

Check the industry-based guidance. Applicability of industry-based metrics must be considered under paragraph 36. Establish your position on this deliberately rather than omitting it.

Align the ESG report with the annual report. The two documents describe the same matters, and inconsistencies between them are a reporting risk. Where the ESG report and the financial statements characterise climate risk differently, that gap is visible.

Build for 2028 while building for 2026. The roadmap points to full HKFRS S1 and S2 adoption for large publicly accountable entities by 2028. A climate disclosure designed only to satisfy Part D will need reworking. One designed with IFRS S1 conceptual foundations in mind will extend.

The broader read is that Hong Kong moved early and phased carefully, and LargeCap issuers have had two years of runway. That runway ends with the financial year now underway. The issuers who used FY2025 comply-or-explain reporting as a genuine dry run are in good shape. Those who explained rather than complied are now facing Scope 3, scenario analysis, financial effects and industry metrics simultaneously, in a year that has already started.

Preparation Checklist

Confirm whether you were a Hang Seng Composite LargeCap Index constituent throughout 2025, which determines mandatory FY2026 reporting.
Note that Scope 1 and Scope 2 have been mandatory for all listed issuers since financial years commencing on or after 1 January 2025.
Plan for full mandatory Part D compliance for financial years commencing on or after 1 January 2026, published in 2027.
Map Scope 3 across all fifteen Greenhouse Gas Protocol categories and prepare justification for any exclusions.
If you are a financial institution, treat financed emissions under Scope 3 Category 15 as a separate methodological workstream.
Address paragraph 20(a) in financial terms, covering effects on cash flows, access to finance and cost of capital across short, medium and long term.
Disclose business model and value chain effects under paragraph 21, including where risks and opportunities are concentrated.
Report the mandatory cross-industry metrics under paragraphs 28 to 35, including greenhouse gas emissions and internal carbon prices.
Consider the applicability of industry-based metrics under paragraph 36, using the IFRS S2 Industry-based Guidance.
Where relying on reasonable information, capabilities, commercial sensitivity or financial effects relief, prepare considered reasons and a dated action plan for each.
Use the HKEX Implementation Guidance, which sets out illustrative examples and step-by-step workflows.
Build with IFRS S1 conceptual foundations in view, given the roadmap toward full HKFRS S1 and S2 adoption by 2028.

Position as of August 2026. The HKEX climate requirements are in force under Part D of Appendix C2, while HKFRS S1 and S2 remain voluntary pending regulatory mandate. Confirm current requirements against HKEX, the HKICPA and, for authorised institutions, the Hong Kong Monetary Authority, and take professional advice for your circumstances.

Sources

Hong Kong Exchanges and Clearing, HKEX Main Board and GEM Listing Rules, HKEX Implementation Guidance for Climate Disclosures, Hong Kong Institute of Certified Public Accountants, Government of the Hong Kong Special Administrative Region, Hong Kong Monetary Authority, IFRS Foundation, Greenhouse Gas Protocol Corporate Value Chain Standard, Skadden Arps Slate Meagher and Flom, Slaughter and May, Norton Rose Fulbright, Freshfields, Linklaters, Charltons, BDO Hong Kong, Hong Kong Chartered Governance Institute, Terrascope, Keslio

This article is intended for general professional information and does not constitute legal, financial, or investment advice.