How Hong Kong companies will be impacted by ISSB and CSRD?

The Impact of the ISSB and EU Corporate Sustainability Reporting Directives (CSRD) on Hong Kong companies will likely be significant.

The ISSB (International Sustainability Standards Board) is a new global sustainability reporting standards board established by the IFRS Foundation. The ISSB is developing global sustainability reporting standards that are expected to be widely adopted by companies around the world, including in Hong Kong. These standards will provide a common language and framework for reporting on sustainability issues, making it easier for investors and other stakeholders to compare companies' sustainability performance.

Similarly, the EU Corporate Sustainability Reporting Directive (CSRD) will require companies operating within the European Union (EU) to report on their sustainability performance. This new directive will replace the current EU Non-Financial Reporting Directive (NFRD), and it will expand the scope of reporting requirements to include more sustainability issues, such as social and employee-related matters.

Hong Kong companies that have business operations within the EU, or that are listed on European stock exchanges, will be directly impacted by the CSRD. They will be required to comply with the new reporting requirements, which will likely be more comprehensive than those required by Hong Kong regulations.

Even for Hong Kong companies that are not directly impacted by the EU CSRD, there may still be an indirect impact. Many large global investors are increasingly focused on sustainability issues, and they are using sustainability performance as a key factor in their investment decisions. As a result, Hong Kong companies that do not report on their sustainability performance may find it more difficult to attract investment from these investors.

Overall, it is likely that the ISSB and EU Corporate Sustainability Reporting Directives will lead to increased pressure on Hong Kong companies to report on their sustainability performance. Companies that are proactive in addressing sustainability issues and reporting on their performance may benefit from increased investor interest and improved reputation.