From 2026, Hong Kong's climate disclosure regime has entered a sharper phase. Under Part D of the ESG Reporting Code in Appendix C2 of the Listing Rules, Hang Seng Composite LargeCap Index constituents are required to report the full set of climate related disclosures on a mandatory basis for financial years commencing on or after 1 January 2026.
This is not simply another incremental reporting requirement. From an ESG, internal control, and board governance perspective, it marks a clear shift in accountability.
The Core Requirements
According to HKEX's official rules and FAQs, all listed issuers on the Main Board and GEM 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 the remaining climate related disclosures under Part D, covering governance, strategy, risk management, and metrics and targets including Scope 3, Main Board issuers report on a comply or explain basis from 2025, while GEM issuers are encouraged to do so voluntarily.
From financial years commencing on or after 1 January 2026, issuers that are constituents of the Hang Seng Composite LargeCap Index must report the full Part D requirements on a mandatory basis. The disclosures are aligned with IFRS S2 Climate related Disclosures and cover the four pillars of governance, strategy, risk management, and metrics and targets.
The Overlooked Once In, Always In Rule
One provision that many issuers still do not fully appreciate is the continuing obligation. HKEX has made clear that the Mandatory Climate Disclosure Requirement applies to an issuer that is a LargeCap Index constituent throughout the year immediately prior to the reporting year. Critically, once an issuer becomes subject to mandatory disclosure of Part D of the Code, it must continue to be subject to mandatory disclosure of Part D even if it subsequently ceases to be a LargeCap Index constituent.
In other words, index membership is the entry point, but exit from the index does not release the company from the obligation. This turns what some boards still treat as a temporary large cap burden into a potentially permanent compliance and governance commitment.
This lookback mechanism also has a practical timing consequence that is easy to miss. Because mandatory status for a given financial year is determined by index membership throughout the prior year, most LargeCap constituents that follow a calendar year financial reporting cycle will see their financial year 2026 determined by their index status through 2025, meaning the first fully mandatory Part D reports under this regime will typically be published during 2027, not 2026. Boards should not read the January 2026 effective date as meaning disclosures are due immediately. The more urgent task in 2026 is building the systems and data trail needed to support that 2027 report, since retrofitting a year's worth of governance and Scope 3 data after the fact is far harder than building it in real time.
Why This Matters for Boards and Internal Control
The shift from comply or explain to mandatory full Part D reporting raises the stakes in three areas that sit squarely within board and internal control responsibilities.
- Board oversight of climate risks. Part D requires clear disclosure of the governance body responsible for climate related risks and opportunities, how management is monitored, and how climate considerations feed into strategy and decision making. Boards can no longer treat climate as a sustainability team issue. It must be embedded in the board's risk oversight framework.
- Internal control and data reliability. Mandatory Scope 3 disclosure, scenario analysis, and transition planning demand robust data systems, clear ownership, and auditable processes. Weaknesses in data collection, estimation methodologies, or internal controls will now be more visible and harder to explain away.
- Risk management integration. Climate related risks must be integrated into the issuer's overall risk management processes. This aligns directly with the enhanced risk management and internal control requirements under the Corporate Governance Code, which already place stronger emphasis on board accountability for the effectiveness of these systems.
Practical Implications for Listed Companies
Companies that are currently LargeCap Index constituents, or that sit close to the threshold, should treat 2026 as a structural change rather than a one time reporting exercise.
- Confirm historical and current LargeCap Index status for the relevant measurement periods.
- Map existing climate governance, data processes, and internal controls against the full Part D requirements.
- Strengthen Scope 3 data collection and supplier engagement processes, since this remains the most significant gap for many issuers.
- Ensure the board, or the designated committee, has clear terms of reference, adequate information flows, and documented oversight of climate related risks and opportunities.
- Prepare for the reality that the mandatory obligation will continue even if the company later leaves the LargeCap Index.
- Align climate disclosure processes with the broader risk management and internal control review that boards must now conduct and report on annually.
Looking Ahead
The 2026 LargeCap mandatory phase is part of Hong Kong's broader roadmap toward fuller adoption of ISSB aligned sustainability disclosure standards. Early preparation on data quality, internal controls, and board oversight will not only support compliance with Part D, but will also position companies better for the next stage of regulatory expectations, including potential assurance requirements, well ahead of the 2027 reporting deadline that most LargeCap issuers will actually face.
For boards and senior management, the message is straightforward. Climate disclosure is no longer a peripheral reporting exercise. It is now a core element of governance, risk management, and internal control, with lasting consequences for those who enter the mandatory regime.
Edited / written by: Amanda Cheung, Founder, AMMO Group
