Three Sign-Off Traps, where HKEX and Mainland packs break, and the 15-category Scope 3 funnel.
Hong Kong listed companies are entering a new phase of climate disclosure under HKEX’s enhanced ESG Reporting Code, Appendix C2, Part D. These “New Climate Requirements” are grounded in IFRS S2 Climate-related Disclosures and make climate reporting a core part of listing compliance rather than a voluntary ESG add-on. From financial years starting on or after 1 January 2025, all Main Board and GEM issuers must disclose Scope 1 and Scope 2 greenhouse gas emissions, with broader climate requirements phasing in depending on issuer category.
This article is written from the perspective of a Hong Kong listed issuer, but with the practical view of a specialist ESG consultant. The first part explains why Appendix C2 climate rules matter and where issuers usually go wrong. The second part is a step-by-step playbook that teaches your organisation how to prepare HKEX-aligned climate disclosure, with special focus on climate scenario analysis and transition risks.
HKEX has renamed and upgraded its ESG framework into Appendix C2, the Environmental, Social and Governance Reporting Code. Appendix C2 now comprises mandatory disclosure requirements and “comply or explain” provisions and forms part of the Listing Rules for both the Main Board and GEM. Part D of Appendix C2 sets out climate-related disclosure requirements that follow the IFRS S2 architecture: governance, strategy, risk management, and metrics and targets.
Implementation is phased. All listed issuers must disclose Scope 1 and Scope 2 greenhouse gas emissions on a mandatory basis for financial years commencing on or after 1 January 2025. For other climate disclosures under Part D, all Main Board issuers report on a comply or explain basis from financial years commencing on or after 1 January 2025, while Hang Seng Composite LargeCap Index constituents move to mandatory reporting for financial years commencing on or after 1 January 2026. This means that climate disclosure is now part of Hong Kong listing compliance, not just voluntary branding.
Market reviews and HKEX guidance show common weaknesses in current ESG reports. Many issuers focus on general ESG messaging and charity work without explaining how climate-related risks and opportunities could reasonably affect cash flows, access to finance or cost of capital. Yet Appendix C2 expects issuers to describe financially relevant climate risks and opportunities, not just reputational topics.
Reports often state that “the board oversees ESG”, but do not identify which committee or directors are responsible for climate topics, how often climate is discussed or how decisions are made. HKEX expects disclosure of governance processes, controls and procedures for monitoring, managing and overseeing climate-related risks and opportunities.
Issuers may state that climate scenario analysis has been carried out, but they rarely describe which scenarios they used, what inputs and assumptions were applied or how the results changed strategy or risk appetite. Under Appendix C2 and the Implementation Guidance, issuers are expected to use climate-related scenario analysis that is “commensurate with the issuer’s circumstances” and to disclose information about scenarios, inputs, uncertainties and conclusions.
Many ESG reports focus on physical risks such as typhoons, flooding and heat waves, but pay little attention to transition risks such as tightening climate regulation, carbon pricing, technology changes and shifting investor and customer expectations, even though these factors frequently drive medium-term financial impacts. HKEX and ISSB materials emphasise that climate-related risks and opportunities which may affect cash flows, access to finance or cost of capital over short, medium and long term must be disclosed.
Value-chain emissions are often omitted or briefly referenced, despite being material in many sectors. Appendix C2 and HKEX guidance expect issuers to identify relevant Scope 3 categories, explain which categories are included in measurement, set out the basis for selection and describe any significant changes in the value chain.
Finally, many issuers rely on HKEX implementation reliefs without explaining how they will build capacity over time. The New Climate Requirements include Reasonable Information Relief, Capabilities Relief, Commercial Sensitivity Relief and Financial Effects Relief to help issuers improve disclosure progressively. These reliefs are helpful, but using them without transparency or a clear roadmap can undermine investor confidence.
Begin by confirming your issuer category and climate timeline. Check whether your company is a Hang Seng Composite LargeCap constituent, another Main Board issuer or a GEM issuer, since this determines which climate disclosures are mandatory and when they must be provided. LargeCap issuers are required to report fully on the Climate Requirements on a mandatory basis for financial years commencing on or after 1 January 2026, while other Main Board issuers report on a comply or explain basis from financial years commencing on or after 1 January 2025. GEM issuers must disclose Scope 1 and Scope 2 emissions and are encouraged to adopt other climate disclosures voluntarily.
Prepare a short internal note summarising your category, effective dates and which climate disclosures are mandatory, comply or explain or voluntary. Share this note with the board, CFO, company secretary and ESG lead to align expectations.
HKEX requires listed issuers to disclose their governance structure and processes for climate-related risks and opportunities. This includes board oversight, management’s role and the way climate topics are monitored and reviewed. Decide at board level whether climate oversight sits with the full board or with a specific committee such as an audit, risk or sustainability committee. Record this decision in board minutes and describe it in your ESG report.
Nominate a senior executive as climate owner, often the chief financial officer or chief operating officer. This person should coordinate climate risk assessment, scenario analysis, emissions data and reporting. Set a minimum expectation that at least once a year, the board or relevant committee holds a dedicated climate discussion covering climate risks, emissions progress and scenario analysis results, and reference this practice in your disclosure.
Appendix C2 requires issuers to disclose climate-related risks and opportunities that could reasonably be expected to affect cash flows, access to finance or cost of capital over short, medium and long term horizons. Start by identifying physical risks such as extreme weather events, sea level rise, flooding, heat stress and supply-chain disruption in your key locations.
Then move to transition risks, which are often more relevant for financial planning. Consider policy and legal risks such as tighter emissions limits, efficiency standards or new reporting rules. Examine technology risks such as the emergence of low-carbon technologies and digital tools that may change asset economics. Assess market and reputational risks as customers, lenders and investors increasingly favour climate-aligned issuers.
Document a clear set of climate risks and opportunities. For each one, note the affected business unit, the time horizon and a simple impact assessment such as high, medium or low. This mapping is the basis for your climate risk register.
HKEX expects climate risks to be managed as part of your overall risk framework. Create a climate risk register, for instance in a spreadsheet, with columns for risk description, category (physical or transition), business area, time horizon, likelihood, impact, existing controls, planned actions and risk owner.
Integrate this climate risk register into your enterprise risk management system by including climate risks in your risk taxonomy and regular risk reviews. Make sure climate risks are considered alongside strategic, operational and financial risks when the board and management review risk information.
Appendix C2 and the Implementation Guidance require listed issuers to use climate-related scenario analysis commensurate with their circumstances to assess climate resilience. You do not need complex modelling to begin; what you need are clear scenarios that your board can understand and use.
A practical starting set for many Hong Kong issuers is an orderly transition scenario, a delayed or disorderly transition scenario and a high physical risk scenario. In the orderly transition scenario, climate policy is introduced early and consistently, carbon prices increase gradually and markets move steadily towards low-carbon solutions. In the delayed or disorderly transition scenario, policy action stays weak at first but strengthens abruptly later, investor pressure rises quickly and technology changes are disruptive. In the high physical risk scenario, global climate goals are not fully met, extreme weather becomes more frequent and severe and physical impacts on assets and supply chains increase.
Write down the main assumptions for each scenario, including regulatory pathways, carbon price ranges, technology trends and customer behaviour.
Apply these scenarios to your core business lines. For each scenario and time horizon, ask finance and business teams how the scenario would affect revenue, operating costs, capex and access to finance in their area. At the beginning, use simple directional assessments such as “increase”, “decrease” or “no significant change”, and record supporting explanations.
Capture where margins may be squeezed by rising energy and carbon costs, where assets might become stranded or require significant retrofits, where new climate-aligned products and markets might emerge and how your financing terms might change. Summarise these insights in internal matrices and use them to inform strategy discussions. When you draft your ESG report, convert these matrices into narrative description of how different climate futures could influence your business model and resilience.
From the scenario results and risk register, identify a small number of strategic responses that directly address your most material transition risks. Examples include upgrading or relocating assets, changing product mix, diversifying markets or customer profiles, adjusting procurement to lower emissions exposure and introducing internal carbon pricing to guide investment decisions.
In your ESG report, explain how scenario analysis influenced these responses. This makes clear that climate-related scenario analysis is being used as a planning tool, not just a disclosure requirement, and aligns with HKEX’s emphasis on strategy and resilience.
Appendix C2 requires disclosure of Scope 1 and Scope 2 greenhouse gas emissions and expects issuers to address material Scope 3 emissions over time. Begin by building a simple greenhouse gas inventory for Scope 1 and Scope 2 using recognised methodologies such as the Greenhouse Gas Protocol Corporate Standard. Present absolute emissions and relevant intensity measures, and compare them year on year.
For Scope 3, do not screen fifteen categories in isolation. Run every GHG Protocol category through the same three questions, in order: financial relevance, data availability, then first-cycle commitment. An absent category reads as an omission; a stated “screened out” or “not yet measured” reads as a considered decision.
When drafting your climate disclosure, follow the four-pillars structure HKEX has adopted from IFRS S2: governance, strategy, risk management and metrics and targets. In the governance section, describe how the board oversees climate topics, which committees are involved, which senior executives are responsible and how often climate is discussed. In the strategy section, explain your key physical and transition risks, main climate-related opportunities, scenario analysis narrative and the strategic responses you are considering or implementing. In the risk management section, describe your climate risk identification, assessment and monitoring processes, including the climate risk register and integration into enterprise risk management. In the metrics and targets section, present emissions data, exposure metrics and climate-related targets, together with explanations of methodologies and assumptions.
State clearly that you have used climate-related scenario analysis to assess your resilience and describe the scenarios, inputs and main findings. This aligns with HKEX’s Implementation Guidance and helps investors understand how you are planning for different climate futures.
A board does not ask “have we made our negative statements yet?” It asks three plain questions, and a climate chapter either answers them or exposes a gap a regulator will find first. These are drafting checks, not policy prescriptions: a missing topic reads as an oversight; a stated “not yet” reads as a controlled, disclosed position.
HKEX’s Implementation Guidance includes several reliefs designed to help issuers build their climate disclosure capabilities over time. These include Reasonable Information Relief, Capabilities Relief, Commercial Sensitivity Relief and Financial Effects Relief. If you rely on these reliefs, say so clearly in your report and explain why. For example, you might state that quantitative scenario analysis is not yet available due to data limitations, or that only some Scope 3 categories are currently measured.
Then describe your plan to improve over the next two to three reporting cycles. This plan can cover data projects, enhanced systems, internal training, adoption of specialist tools and engagement of external advisors. Transparent use of reliefs and a concrete improvement roadmap show regulators and investors that your company is moving purposefully towards full, decision-useful climate disclosure under Appendix C2.
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HKO’s September summary of August 2026, nine consecutive Very Hot days and three consecutive Extremely Hot days, turns observational heat records into HKEX Part D physical-risk evidence for workforce, operations and asset vulnerability, not a one-day weather footnote.
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WMO and the Hong Kong Observatory confirm a firmly established El Niño expected to become very strong, with nearly 100% likelihood of persisting through February 2027, turning Part D scenario analysis and physical-risk disclosure into a near-term stress test for Hong Kong listed issuers.
A practical guide to HKEX Part D climate disclosure timelines for Scope 1, 2 and 3, who falls in scope, and what boards should check before the next reporting cycle.
Several years of HKEX ESG Code-compliant reports can still sit on spreadsheets, single owners and ad-hoc Scope 3 collection. This AMMO Group insight treats that fragile climate-data infrastructure as a governance and assurance-readiness gap under Part D for HSCLI financial years commencing on or after 1 January 2026 and enhanced CG Code risk／internal-control confirmation — not as an operations inconvenience. The fix is an end-to-end audit trail on the same evidence spine as listing-rule disclosure; key-person dependency is the failure mode.
On 29 July 2026 GHG Protocol and ISO announced they will combine the Corporate Standard, Scope 2 Guidance, Scope 3 Standard, AMI workstream and ISO 14064-1 into one co-branded corporate carbon accounting standard, with public consultation in Q2 2027 and final publication targeted for Q4 2028 — more than two years from the announcement, building on their September 2025 partnership and linked to the COP30 Action Agenda. This AMMO Group insight argues the co-branded unification is a multi-year residual-risk calendar, not a Part D / inventory free pass: keep the current measurement-control spine (boundaries, Scope 2/3, AMI multi-statement without netting) intact through FY2026–FY2028 — do not freeze or weaken inventories waiting for the co-branded document.
From FY2026, Hang Seng Composite LargeCap Index constituents face mandatory full Part D climate disclosure under HKEX rules, with a continuing obligation that persists even after leaving the index.
For mainland-related issuers, Part D climate disclosure often sits between HKEX expectations and Mainland sustainability calendars. We help stage Scope 1–3 and climate narrative so the board has one evidence base for both.
AMMO Group Corporate Services Limited
AMMO Group advises Hong Kong–listed issuers on ESG reporting, climate disclosure and board governance under the HKEX codes. Practical notes for company secretaries and IR — not generic sustainability commentary.
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