Breaking: Hong Kong's Biggest Companies Just Received a Wake-Up Call for Climate Action

Hong Kong

– Hong Kong-listed companies are facing a new challenge in their efforts to become more environmentally friendly

A recent call to action from the Hong Kong Institute of Certified Public Accountants (HKICPA) is urging companies to increase transparency when it comes to their greenhouse gas emissions This comes as a crucial step in the fight against climate change

The HKICPA an independent body responsible for setting standards for the accounting profession in Hong Kong is pushing for the development of localised calculation references and projections for climate scenarios These tools would aid in the accurate measurement and reporting of emissions by listed companies

The need for localised references stems from the fact that Hong Kong’s unique economic and environmental conditions are not accurately reflected in international guidelines and standards

We see an increasing need for guidance on this local level

The HKICPA is stressing the importance of these references in helping companies to gain a deeper understanding of their environmental impact and to track their progress towards a more sustainable future The development of such guidelines would undoubtedly mark a significant step forward for Hong Kong’s efforts in tackling climate change

Climate change carries with it severe and wide-reaching consequences that affect economies the environment and human societies alike The importance of corporate climate action should not be underestimated and listed companies have a critical role to play in reducing their greenhouse gas emissions and mitigating their environmental footprint

The Hong Kong Stock Exchange (HKEX) requires listed companies to disclose their environmental social and governance (ESG) data under the Environmental Social and Governance Guide for Boards and Directors

This requirement includes the disclosure of greenhouse gas emissions which poses a challenge for many companies

However the lack of localised calculation references and climate scenarios makes it difficult for these companies to accurately measure and report their emissions In some cases this may result in inaccurate data and a lack of confidence in ESG reporting among investors

The HKICPA is calling for better tools and more targeted guidance to be developed at the local level This should include the creation of calculation references that reflect Hong Kong’s specific economic and environmental conditions as well as projections for climate scenarios

Climate scenarios are essential in helping companies predict and prepare for the potential physical and transitional risks associated with climate change These risks can have devastating consequences for businesses such as supply chain disruptions or regulatory changes

Physical risks include extreme weather events such as typhoons droughts and sea-level rises Transitional risks on the other hand refer to the impact of regulatory changes in response to climate change on businesses such as changes to carbon pricing policies or green finance regulations

The development of localised calculation references would greatly enhance the accuracy and effectiveness of ESG reporting and help companies make more informed decisions about their environmental strategies and financial planning

For instance by using climate scenarios companies can better understand the likelihood of extreme weather events and develop strategies to mitigate the risks This can include investing in flood-resistant infrastructure or implementing sustainable agriculture practices

The push for improved ESG reporting and climate action is also driven by growing investor demand for environmentally responsible investments

Investors are increasingly looking for companies that demonstrate a strong commitment to sustainability and are actively working to reduce their environmental impact Companies that can accurately measure and report their emissions are better positioned to attract these investors and reap the associated benefits

It is essential that listed companies take proactive steps to address the challenges posed by climate change This includes adopting more sustainable practices and reducing their greenhouse gas emissions The development of localised calculation references and climate scenarios will undoubtedly play a critical role in supporting these efforts

The HKICPA is committed to supporting companies in their sustainability journey through the development of practical tools and guidance The challenges posed by climate change require a collective effort and the HKICPA is proud to be at the forefront of this effort