KPMG Climate-Change-Reporting

Climate Change
Reporting:
Imminent, Challenging & Mandatory – The Opening Moves
kpmg.com/cn
Contents
Foreword 01
Executive Summary 03
The International Sustainability Standards Board and its proposals 08
Focus area 1 Adopting the ‘Enterprise Value’ approach to 12

materiality
Quantifying the current and anticipated financial effects 14
Focus area 2
of climate issues
Focus area 3 Conducting climate-related scenario analysis 16
Focus area 4 Formulating the climate transition plan and

18
setting the targets
Focus area 5 Determining and reporting on the metrics 20
Readiness of surveyed Hong Kong companies 24
Conclusion and next steps for companies 26
About KPMG, HKCGI and CLP 28
Contact Us 30
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KPMG global organisation of independent member firms affiliated with KPMG International Limited, a private English company limited by guarantee. All rights reserved.
Climate Change Reporting: Imminent, Challenging & Mandatory – The Opening Moves 1
Foreword
The fallout from failing to manage climate change is proposals for its first two standards, one dealing with
considered as one of the biggest threats to humanity. In general sustainability-related disclosure requirements and
fact, in the World Economic Forum’s Global Risks Report the other on climate-related disclosure requirements. These
2022, climate-related risks account for the three most two proposals built upon the TCFD recommendations and
severe risks affecting people in the next 10 years, with are structured around the four pillars that represent core
climate action failure considered as the top medium and elements of how companies operate, namely: governance,
long-term threat.1 strategy, risk management, as well as metrics and targets.
Climate change also has a substantial impact on The ISSB Board expects to finalise the two standards by
businesses. There is ever-increasing pressure to take the end of 2022. In Hong Kong, the Green and Sustainable
actions to slow climate change and reduce carbon Finance Cross-Agency Steering Group expressed its
emissions. These efforts are expected to continue to support for adopting the ISSB Board’s standards.3 In
intensify over the coming years as the global economy particular, the Securities and Futures Commission (SFC)
transitions towards a low-carbon model. As revealed in and Hong Kong Exchanges and Clearing Limited (HKEX)
KPMG’s 2021 CEO Outlook, 30 percent of surveyed CEOs are engaging with industry practitioners to evaluate how
plan to invest more than 10 percent of their revenues the ISSB Board’s proposed requirements can be applied
to make their business more sustainable and to address in Hong Kong. It is expected that reporting under the
related climate change risks.2 ISSB Board’s standards will become mandatory for listed
companies.
Regulators and investors are also demanding increased
transparency on how businesses deliver on climate goals Companies should prepare themselves for the inevitable
and address climate-related issues within a tight time ISSB Board’s standards. Governance professionals,
frame. This has resulted in the development of several who serve as the company secretary and governance
climate-related disclosure frameworks, the most prominent advisers of listed companies, play a vital role in providing
of which is the recommendations released by the Task advice and direction about the emerging climate reporting
Force on Climate-Related Financial Disclosures (TCFD) in requirements and assisting the board in meeting those
2017. The TCFD was established by the Financial Stability requirements.
Board, an international body comprising G20 finance
ministers and central bank governors, to help identify the To help companies better anticipate issues in adopting
information needed by investors, lenders and insurance the proposed ISSB Board’s standards, KPMG China has
underwriters to appropriately assess and price climate- once again collaborated with The Hong Kong Chartered
related risks and opportunities. Governance Institute (HKCGI) and CLP Holdings Limited
(CLP) to jointly produce this report. This publication will
Responding to calls for a more consistent and comparable explore the focus areas which may warrant additional
baseline of investor-focused sustainability standards, attention and resources, together with recommendations
the International Financial Reporting Standards (IFRS®) about how companies can make their opening moves.
Foundation established the International Sustainability
Standards Board (ISSBTM Board) at COP 26 in November We welcome the opportunity for discussion, and hope
2021, with an initial focus on climate-related financial you find the insights within this publication useful as your
disclosures. On 31 March 2022, the ISSB Board released company embarks on its climate journey.
1
‘The Global Risks Report 2022’, World Economic Forum, 2022, https://www3.weforum.org/docs/WEF_The_Global_Risks_Report_2022.pdf
2
‘KPMG 2021 CEO Outlook’, KPMG International, 2021, https://assets.kpmg/content/dam/kpmg/xx/pdf/2021/09/kpmg-2021-ceo-outlook.pdf
3
‘Green and Sustainable Finance Cross-Agency Steering Group welcomes publication of International Sustainability Standards Board proposed standards for
public consultation’, Hong Kong SAR Government, accessed on 6 May 2022, https://www.info.gov.hk/gia/general/202203/31/P2022033100606.htm
2 Climate Change Reporting: Imminent, Challenging & Mandatory – The Opening Moves
“ The development of global baseline standards by

the International Sustainability Standards Board
is a significant milestone in the effort to retool
the financial system to deal with climate change.
Hong Kong’s potential adoption of these standards
has enormous significance. Incorporating them
into local requirements will establish a framework
for disclosures which provide investors with key
information about the impact of climate risks
on corporate performance. This report presents
a timely perspective on the key issues listed
companies will need to consider.
Ashley Alder
Chief Executive Officer, Securities and Futures Commission,
and Chair of the Board, International Organization of Securities Commissions
“
Executive summary
Climate change is a strategic issue requiring board This report identifies five focus areas relating to the
oversight. Failure to take appropriate steps can expose a adoption of the imminent climate reporting regime by the
company to material business risks. By the same token, ISSB Board. These areas are either different from or not
companies and directors are also exposed to climate- fully aligned with the HKEX’s ESG Reporting Guide, and
related litigation risks for failure to consider and manage may therefore be relatively new to companies in Hong
climate-related risks. Companies preparing climate Kong. They are:
reporting under the ISSB Board’s climate proposal to
address climate-related disclosures should adopt a
strategic lens and ensure their reporting serves as an
appropriate risk mitigation.
Adopting the Quantifying the Conducting Formulating the Determining and

1 ‘Enterprise Value’
approach to
2 current
and anticipated
3 climate-related
scenario analysis
4 climate transition
plan and setting
5 reporting on the
metrics, such as
materiality financial effects the targets scope
of climate issues 3 emissions
“ The IFRS Sustainability Disclosure Standards signal a seismic change in

global corporate reporting as it aims to share an entity’s sustainability
information in a relevant, timely and comparable manner. It may not be easy
to achieve this and management will need to put the governance in place
to adapt. At KPMG, we have a relentless focus on our Environmental, Social
and Governance (ESG) commitments, which we set out in Our Impact Plan
(OIP). This allows us to reaffirm our commitments and share our journey
to become a better business to all our stakeholders. I truly believe that the
development of the global baseline standards can provide a solid foundation
for the business community to help shape a more sustainable future — one
that is aligned with purpose.
Andrew Weir
Senior Partner, Hong Kong
KPMG China
“
In implementing the processes underpinning the ISSB expected that mandatory regulatory reporting based on the
Board’s climate reporting regime, common areas ISSB Board reporting regime will be in place. Nevertheless,
of concern include: availability of data, selection of it appears that many listed companies are ill-equipped to
methodology and use of assumptions, coordination of deal with these new disclosures and face many challenges
organisational support, and availability of appropriate with climate change reporting.
human and other resources.
During a webinar hosted by HKCGI on 5 May 2022,
Regardless of these concerns, climate change reporting featuring speakers from KPMG and CLP, a survey was
is pressing ahead as it helps drive business performance held to understand how prepared companies in Hong Kong
and create resilience. Regulators and investors are also are for climate change reporting. The survey was taken by
demanding increased disclosures on how a company’s around 125 respondents, primarily comprising governance
strategy and business model address climate-related professionals from Hong Kong, with key findings
risks and opportunities. For example, in Hong Kong, it is summarised on the next page.
“ The governance professional which our Institute represents is at the forefront

of providing governance advice to listed companies and other industry players.
This includes reporting on climate change, a most pressing issue of our times.
Accordingly, our Institute is proud of our thought leadership position on the
emerging international reporting standards and promoting the related best
practices to see them through.
Ernest Lee FCG HKFCG(PE)

President, HKCGI
“
Climate change reporting by surveyed companies in Hong Kong

Only 17% have performed a Top three challenges to reporting scope 3 emissions are:
climate-related scenario
analysis 37% Hard to get relevant data
23% Lack of internal expertise/resources
The selection and application of

17% methodologies
Companies are using a variety of approaches to identify climate-related risks and opportunities*
Internal management review 22%

Stakeholder engagement (excl. with investors and lenders) 19%
Engagement with investors and lenders 16%
Industry review 14%
Peer benchmarking 13%
86% of respondents stated that

Support needed to adopt ISSB Board's climate proposal*
their companies have not set a Resources and expertise

climate transition plan
24% (both internal and external)
21% Further industry guidance
47% consider that their companies

21%
More practical guidance
are unlikely to set one (e.g. case studies)
Results based on a survey held among 125 governance professionals based in Hong Kong
*Respondents could select more than one answer
Recognising that climate change-related disclosures will zero planning should do so soon. In addition, this report
likely become mandatory and the processes behind the will consider the necessary opening moves to be adopted
scenes are complex and time-consuming, companies that by companies, namely the need to:
have not yet started on their climate risk disclosure and net
Integrate climate
Educate the issues into the Establish a Expand systems,
board governance cross-functional processes and
structure team controls
Governance professionals play a vital role in providing provide thought leadership from the applied governance
advice and direction on emerging climate reporting perspective on this top of the agenda global issue.
requirements and assisting the board in taking the actions The time for action on climate change reporting will be
to meet those requirements. This report is intended to imminent, challenging and likely, mandatory.
“ Increasing requirements for climate reporting and climate action is the clear
direction of travel which no business can ignore and this report contains a
host of timely, valuable and practical recommendations for all business in
tackling these issues.
David Simmonds FCG HKFCG

Chief Strategy, Sustainability and Governance Officer, CLP Holdings Limited;
Vice-President and Chairman of the Membership Committee, HKCGI
“
The International
Sustainability Standards
Board and its proposals
Before turning to the five focus areas, we recap, for Standards Board (CDSB) and is expected to consolidate the
companies and governance professionals, that the Value Reporting Foundation, which houses the Integrated
International Sustainability Standards Board (ISSBTM Reporting Framework and the Sustainability Accounting
Board) is a standard-setting body established under the Standards Board (SASB), by August 2022.
IFRS Foundation in November 2021. The ISSB Board
aims to deliver a comprehensive and global baseline of On 31 March 2022, the ISSB Board released its first two
sustainability-related disclosure standards that meet the exposure drafts: one outlining general sustainability-related
information demands of investors and other capital market financial disclosures requirements, and another specifically
participants in respect of companies’ sustainability-related in relation to climate-related disclosures. These two
risks and opportunities. proposals are designed to be applied together for climate
reporting. There will be further exposure drafts over time,
The ISSB Board works closely with the IFRS’s International meaning we are only at the initial stages of developing the
Accounting Standards Board (IASB® Board) to ensure that ISSB Board’s reporting regime. Companies are likely to be
the sustainability standards developed by the ISSB Board impacted by sustainability-related risks and opportunities,
establish a strong connection with financial statements. in addition to those related to climate change, e.g.
biodiversity and human capital. They are advised to monitor
The ISSB Board aims to consolidate and build on the work the development of future standards as this will affect
of existing investor-focused reporting initiatives to create their disclosures of other sustainability-related risks and
a global baseline for sustainability reporting. Specifically, opportunities.
the ISSB Board has consolidated the Climate Disclosure
“ We can take a leadership position in Asia if the global baseline standards developed
by ISSB are adopted in Hong Kong, starting with climate-related disclosures.
Listed companies are encouraged to take early action to integrate climate-related
impact into their systems, processes and governance to facilitate reporting under
the proposed ISSB framework. This should help reduce reporting burdens against
multiple standards and facilitate global comparability of impact of climate-related
risks on corporate performance and global efforts to tackle greenwashing. A top-
down and bottom-up retuning of mindset from each organisation is needed to tackle
the many challenges ahead – to make this once-in-a-generation opportunity a reality.
Teresa Ko JP BBS
Senior Partner, Hong Kong and China Chairman,
Freshfields Bruckhaus Deringer;
Co-Vice Chair, IFRS Foundation
“
Proposal 1: Draft IFRS S1 General Requirements for Disclosure of

Sustainability-related Financial Information
The first proposal relates to the general requirements for disclosure of sustainability-related
financial information, including definitions and requirements that are consistent with the
IASB Board’s Conceptual Framework for Financial Reporting, IAS 1 Presentation of Financial
Statements and IAS 8 Accounting Policies, Changes in Accounting Estimates and Errors.
In a nutshell, the proposal requires a company to disclose material information about all the
significant sustainability-related risks and opportunities to which it is exposed. It is designed to
enable primary users to assess enterprise value.
The proposal builds on the TCFD recommendations and requires disclosure of information
on the four core pillars of how a company operates, namely: governance, strategy, risk
management, and metrics and targets. It also incorporates the industry-based requirements
from the SASB Standards from which a company selects industry-based metrics, among other
metrics that are required by the proposal. The SASB Standards are a set of 77 industry-specific
standards designed to help companies disclose material and useful information to investors.
The proposal also requires a company to explain the connections between different pieces
of information, including the linking of various sustainability-related risks and opportunities to
information in the company’s financial statements.
The sustainability-related financial information must cover the same reporting entity as the
financial statements, and it must be published as part of the company’s general-purpose
financial reporting. It should also be made available at the same time as the company’s financial
statements.
Proposal 2: Draft IFRS S2 Climate-related Disclosures

The second proposal focuses on climate-related disclosures and requires a company to
disclose information about its exposure to significant climate-related risks and opportunities.
The objective of this information is to enable investors and other providers of other financial
capital to:
• Assess the effects of significant climate-related risks and opportunities on the company’s
enterprise value
• Understand how the company’s use of resources, and corresponding inputs, activities,
outputs, and outcomes support its response to and strategy for managing its significant
climate-related risks and opportunities, and
• Evaluate the company’s ability to adapt its planning, business model and operations to
significant climate-related risks and opportunities.
The proposal incorporates recommendations and guidance from the TCFD and again requires a
company to provide information on all four pillars (governance, strategy, risk management, and
metrics and targets).
Next steps for the ISSB Board

The ISSB Board is seeking feedback on the proposals by As currently worded in the proposals, if a company would
29 July 2022. It will review the feedback in the second like to assert compliance with the IFRS Sustainability
half of 2022 and aims to issue the new standards by the Disclosure Standards, for sustainability topics other than
end of 2022. The new standards will become the IFRS climate, it will need to exercise its judgment in identifying
Sustainability Disclosure Standards. disclosures that are relevant to the decision-making
needs of the primary users and faithfully represent the
At present, the IFRS Sustainability Disclosure Standards company’s risks and opportunities in relation to the specific
are only in their infancy. As noted above, the ISSB Board sustainability-related risk or opportunity. In making such
will issue other topic-specific standards in the future. judgements, the proposal requires companies to consider
the following sources:
The ISSB Board’s non-mandatory guidance

Disclosure topics in the industry-based (such as the CDSB Framework application
SASB Standards guidance for water- and biodiversity-related
disclosures)
The most recent pronouncements of other

Sustainability-related risks and opportunities
standard-setting bodies whose requirements
identified by companies that operate in the
are designed to meet the needs of primary
same industries or geographies
users of general-purpose financial reporting
If a company decides to prepare its climate-related For further details on the two
disclosures in accordance with the ISSB Board’s proposals, proposals, please refer to
but not for other sustainability-related risks and opportunities, the ISSB Board’s proposals
then the company cannot assert compliance with the IFRS and KPMG ISG’s New on
Sustainability Disclosure Standards, which is likely to be the Horizon publication on
predominantly required by investors over time. sustainability reporting.
“ As Asia’s largest listed exchange operator and market regulator, HKEX is

committed to pioneering and promoting ESG excellence, and will continue to
lead our issuers in their sustainability journeys. We strive to create a sustainable
framework underpinned by robust ESG standards and regulations. HKEX will
review our Rules to further enhance climate disclosures, taking into account the
state-of-readiness and capabilities of our issuers. Climate action is no longer a
“nice-to-have”. Companies must put purpose into practice by setting actionable
plans for a low-carbon resilient future.
Bonnie Y Chan
Head of Listing, HKEX
“
Focus areas
This next section examines the five focus areas that are either different from or are not fully aligned with the HKEX’s ESG
Reporting Guide. Therefore, we expect preparation work will be needed for those areas as companies look to implement
the IFRS Sustainability Disclosure Standards on climate-related information.
Adopting the ‘Enterprise Value’ approach

Focus area 1: to materiality
Materiality is the foundation for reporting under the IFRS The proposals further explain that sustainability-related
Sustainability Disclosure Standards, as it underpins the financial information is material if it influences primary
topics and information that is to be reported. In practice, users’ assessments of the company’s enterprise value.
identifying materiality is a challenging topic for most Enterprise value is defined as the total value of the
companies and one that changes over time. The ISSB company and is the sum of the value of the entity’s equity
Board’s proposals allow companies not to disclose a (market capitalisation) and the value of the company’s net
specific piece of required information if that information debt. Enterprise value reflects expectations of the amount,
is determined to be not material. On the other hand, a timing and certainty of future cash flows over the short,
company should consider providing more than the required medium and long term and the value of those cash flows
information if such additional information is considered in light of the company’s risk profile, its access to finance
material. and cost of capital.
The ISSB Board’s proposals define materiality based on The materiality assessment also affects the reporting
the materiality concept used in the International Financial boundary. While the proposals define the reporting
Reporting Standards (IFRS) Accounting Standards. boundary to be the same as the financial statements, they
Information is determined to be material if omitting, also require the disclosure of information about parties
misstating or obscuring that information could reasonably outside of the company when such information affects
be expected to influence decisions that the ‘primary users’ the primary users’ assessment of enterprise value. For
of general-purpose financial reports make on the basis of instance, a company may determine that information
those reports. This is an important useful working principle about sustainability risks and opportunities arising from
that companies need to consider when in doubt on the its supplier is material to investors’ assessment of its
issue of materiality. enterprise value.
These primary users are existing and potential investors,

lenders and other creditors. The general-purpose financial
reporting includes a company’s financial statements and
sustainability-related financial information. It provides
information that is useful to the primary users in making
decisions relating to providing resources to the company.
In addition, the materiality assessment also affects the In addition, other sustainability reporting frameworks, e.g.
determination of the completeness of the sustainability GRI, require disclosure of sustainability matters that reflect
topics or information to be reported. The proposals require the significant impacts of a company on the environment
companies to report on a “complete set” of sustainability- and society. This is different from the materiality definition
related risks and opportunities. Even if there is no relevant of the ISSB Board’s proposals, which focuses on the
topic-specific IFRS Sustainability Disclosure Standard, impacts of sustainability-related matters on the company.
a company would need to disclose the topic if the
information is determined to be material. Given the difference in the definition of materiality between
the ISSB Board’s proposals and broader sustainability
Material sustainability-related financial information reporting frameworks, a company may identify different
disclosed by a company may change from one reporting topics or information that needs to be reported for the
period to another, as circumstances and assumptions existing sustainability reports and the sustainability report
change. Therefore, the proposals require the company to prepared under IFRS Sustainability Disclosure Standards.
reassess its materiality judgements at each reporting date. For instance, under the ISSB Board’s general requirements
proposal, a company does not need to consider all its
The 'Enterprise Value' approach to materiality adopted by significant impacts on the environment and society, but
the ISSB Board differs from other sustainability reporting only those impacts that could reasonably be expected
frameworks, which adopt a broader definition of materiality to affect primary users’ assessment of the company’s
based on the needs of other stakeholders in addition to the enterprise value.
providers of financial capital.
The ‘Enterprise Value’ approach to

For example: materiality under the proposals may be new
to companies that have been preparing ESG
The HKEX defines materiality as “the threshold reports for wider stakeholders. Meanwhile,
at which ESG issues determined by the board the proposals do not specify the process for
are sufficiently important to investors and other assessing materiality. A company may find the current
stakeholders that they should be reported”4 process for assessing materiality under the broader
sustainability reporting frameworks to be a good
The Global Reporting Initiative (GRI) requires the
starting point and adapt this process to align with the
reporting of matters that reflect a company’s
ISSB Board’s focus on enterprise value. Regardless,
significant economic, environmental and social
it is best for companies to get up to speed on
impacts or those that would substantively
materiality, including the necessary reporting to
influence the assessments and decisions of
primary users and other stakeholders under other
stakeholders.5
sustainability reporting frameworks.
4
‘How to Prepare An ESG Report’, HKEX, 2020, https://www.hkex.com.hk/-/media/HKEX-Market/Listing/Rules-and-Guidance/Environmental-Social-and-
Governance/Exchanges-guidance-materials-on-ESG/step_by_step.pdf
5
‘GRI 101: Foundation’, GRI, 2016, https://www.globalreporting.org/standards/media/1036/gri-101-foundation-2016.pdf
Quantifying the current and anticipated

Focus area 2: financial effects of climate issues
The financial effects of climate-related risks and opportunities climate-related risks and opportunities on its financial
provide useful information to investors. As revealed in the position, financial performance and cash flows for the
TCFD 2021 status report, over nine out of ten users of reporting period, as well as the anticipated effects over the
such information find the disclosure of actual and potential short, medium, and long term. If the company is unable to
financial impacts useful. Investors leverage such disclosure provide quantitative information of the above matters, it will
for financial impact assessments, while rating agencies need to explain why this is the case and provide qualitative
consider such information as an increasingly important input information.
for the rating process.6
Specifically, a company is required to disclose the following,
The ISSB Board’s climate proposal requires a company which go outside the realms of traditional reporting:
to disclose quantitative information, expressed as single
amounts or a range, about the effects of significant
Subject Information to be disclosed
Actual financial How significant climate-related risks and opportunities have affected its most recently
effects reported financial position, financial performance and cash flows.
Potential financial Information about climate-related risks and opportunities for which there is a
effects within significant risk that there will be a material adjustment to the carrying amounts of
the next assets and liabilities reported in the financial statements within the next financial
financial year year.
Potential financial How the company expects its financial position and financial performance to
effects over time change over time, given its strategy to address significant climate-related risks and
opportunities.
Impacts on the financial position include disclosing:

• the company’s current and committed investment plans (for example, capital
expenditure, major acquisitions and divestments, joint ventures, business
transformation, innovation, new business areas and asset retirements), and
• its planned sources of funding to implement its strategy.
Examples of impacts on the financial performance may include the following:

• increased revenue from or costs of products and services aligned with a lower-
carbon economy, consistent with the latest international agreement on climate
change
• physical damage to assets from climate events, and
• the costs of climate adaptation or mitigation.
Financial How climate-related risks and opportunities are included in the company’s financial
planning planning.
6
‘Task Force on Climate-related Financial Disclosures: 2021 Status Report’, TCFD, 2021, https://assets.bbhub.io/company/sites/60/2021/07/2021-TCFD-
Status_Report.pdf
In its 2021 status report, the TCFD describes several Many TCFD reporters use recognised third-
challenges and lessons learnt by preparers, including party scenarios, such as those developed by the
companies, around effectively assessing and disclosing International Energy Agency (IEA) or Network for
the financial impact of their climate-related risks and Greening the Financial System (NGFS), which
opportunities. These include:7 contain predetermined methodologies and facilitate
comparison of the results. However, these scenarios
Coordinating organisational support and are not often at the appropriate level of granularity
resources: In view of the wide range of climate- needed for company-level use. Companies that are
related impacts that can affect a company, financial considering adapting third-party scenarios will likely
impact analysis is a multi-disciplinary process that need support in translating the scenarios to the
involves personnel and resources from strategy, risk, company or business level.
finance, legal, R&D and sustainability teams, among
others. A lack of collaboration can result in difficulties In addition, climate-related scenarios cover a longer
in identifying assumptions and assessing business time horizon which goes beyond typical business
implications of climate-related risks and opportunities. planning timelines. Companies will need to develop
a baseline forecast from which to attribute quantified
Obtaining relevant data: Considering the complexity financial effects and estimate scenario impacts.
of estimating financial impacts, it may be difficult
to obtain relevant data, examples of which include Obtaining buy-in to disclose the information:
data from suppliers and granular, asset-level data Companies will need to obtain buy-in and approvals
which serve as inputs to financial impact analysis. from a range of functions, such as legal, corporate
Companies will need to consider what the required communications, finance, and strategy teams.
data are and how to obtain those. These functions may have concerns about disclosing
financial impacts for a variety of reasons, such as
Determining actual financial impacts: This concerns about disclosing confidential information
process often includes attributing specific financial about the company’s strategy, potential legal liability
effects to climate events, while financial effects associated with disclosure of forward-looking
can be attributed to a number of factors in addition information which may vary from actual results,
to climate. It likely involves companies making and lack of confidence in data, methodology and
judgments, which may be subjective in nature, assumptions.
to identify and disaggregate the financial effects
driven by climate-related factors from those that are Understanding that many companies are in an early stage
influenced by other factors. of quantifying the financial effects of climate-related risks
and opportunities, the ISSB Board allows disclosure of
Estimating potential financial impacts: Estimating qualitative information if a company is unable to provide
forward-looking financial impacts involves the quantitative information.
selection of a methodology and the use of
assumptions. In this regard, climate-related scenario
analysis can be a useful tool that helps companies Companies preparing themselves for the
understand and estimate the potential financial proposals can refer to the guidance developed
effects of climate-related risks and opportunities. by the TCFD and lessons learnt by the TCFD
reporters as set out in its 2021 status report.8
7-8
‘Task Force on Climate-related Financial Disclosures: 2021 Status Report’, TCFD, 2021, https://assets.bbhub.io/company/sites/60/2021/07/2021-TCFD-
Status_Report.pdf
Focus area 3: Conducting climate-related scenario analysis

Climate-related scenario analysis is a process for identifying to understand the resilience of a company’s business
and assessing a potential range of outcomes of future model and strategy to climate change. In this regard,
events under conditions of uncertainty. This is likely to be the ISSB Board’s climate proposal has built on the TCFD
most challenging to companies. For example, the financial recommendations and incorporated the requirement to
impact of the flooding of waterfront properties owned by apply climate-related scenario analysis – unless a company
a company will depend on the projected rise of sea levels is unable to do so.
based on a different range of temperature changes. In this
case, a scenario analysis will be most useful for primary The proposal has also added information to be disclosed
users’ investment decisions. Such an analysis allows a regarding significant areas of uncertainty for strategy
company to explore and develop an understanding of how resilience, a company’s capacity to adjust and adapt its
climate-related risks and opportunities may impact its strategy over time, and details on how scenario analysis or
business, strategies and financial performance over time. other assessments have been conducted.
Climate-related scenario analysis can be a useful tool to Specifically, the climate proposal requires the disclosure of
assess potential financial impacts, as mentioned before. the following information regarding climate resilience:
It is also the preferred approach to enable primary users
Results of the • The implications of the findings for the company’s strategy
analysis • Significant areas of uncertainty considered in the analysis
• The company’s capacity to adjust or adapt its strategy or business over the short,
medium, or long term in terms of:
- The availability of, and flexibility in, existing financial resources to address climate-
related risks, and/or to be redirected to take advantage of climate-related opportunities
- The ability to redeploy, repurpose, upgrade, or decommission existing assets, and
- The effect of current or planned investments in climate-related mitigation, adaptation,
or opportunities.
When using other assessments

When using climate-related scenario analysis rather than climate-related
scenario analysis
Overview of • Which scenarios are used and the sources thereof • An explanation of the methods/
the analysis • Whether a diverse range of scenarios have been techniques used
compared • The climate-related assumptions
• Whether the scenarios are associated with transition used in the analysis
risks or physical risks • An explanation of why those
• Whether a scenario used aligns with the latest assumptions are relevant to the
international agreement on climate change, and assessment, and
• An explanation of why the chosen scenarios are • An explanation of why the
relevant to the analysis. company was unable to use
climate-related scenario analysis.
Horizons, inputs • The time horizons used in the analysis • Same as that when scenario
and assumptions • The inputs used, including the scope of risks, the scope analysis is used.
of operations covered and details of the assumptions,
and
• Assumptions about the way the transition to a lower
carbon economy will affect the company, including
policy assumptions, assumptions about macroeconomic
trends, energy usage and mix, and technology.
For companies, climate-related scenario analysis can be a The ISSB Board also understands that many companies
demanding task due to the following:9 may still be at an early stage of exploring the use of
climate-related scenario analysis. As a result, the ISSB
Difficulties in developing scenarios that are relevant Board’s proposal allows companies to use an alternative
to the business/company approach if they are unable to conduct climate-related
scenario analysis, provided that they disclose information
Gaps in availability of sufficiently granular, business-
that is similar to that resulting from climate-related scenario
relevant data and support tools
analysis and an explanation of why they are unable to
Difficulties in understanding the results of the conduct the analysis. Examples of alternative approaches
modelling and translating them into strategic include qualitative analysis, single-point forecasts,
decisions, and sensitivity analysis and stress tests.
Concerns about disclosing the results of scenario

analysis, which are forward-looking and may be Various guidance has been issued in recent
perceived as speculative in nature. years to assist companies in exploring the
use of climate-related scenario analysis.
The 2018 to 2021 TCFD Status Reports identified that the
For instance, TCFD released guidance on how to
percentage of companies disclosing the resilience of their
conduct scenario analysis in 2020.11 HKEX also issued
strategies under different climate-related scenarios has
its guidance on climate disclosures in 2021.12 The
been the lowest among all recommended disclosures for
World Business Council for Sustainable Development
all those years.10
(WBCSD) also developed business-relevant
approaches to climate-related scenario analysis.13
9
‘Task Force on Climate-related Financial Disclosures: Guidance on Scenario Analysis for Non-Financial Companies’, TCFD, 2020, https://assets.bbhub.io/company/
sites/60/2020/09/2020-TCFD_Guidance-Scenario-Analysis-Guidance.pdf
10
‘Task Force on Climate-related Financial Disclosures: 2021 Status Report’, TCFD, 2021, https://assets.bbhub.io/company/sites/60/2021/07/2021-TCFD-Status_Report.pdf
11
‘Task Force on Climate-related Financial Disclosures: Guidance on Scenario Analysis for Non-Financial Companies’, TCFD, 2020, https://assets.bbhub.io/company/
sites/60/2020/09/2020-TCFD_Guidance-Scenario-Analysis-Guidance.pdf
12
‘HKEX Guidance on Climate Disclosures’, HKEX, 2021, https://www.hkex.com.hk/-/media/HKEX-Market/Listing/Rules-and-Guidance/Environmental-Social-and-
Governance/Exchanges-guidance-materials-on-ESG/guidance_climate_disclosures.pdf?la=en
13
‘Climate Scenario Analysis Reference Approach: For Companies in the Energy System’, WBCSD, 2022, https://www.wbcsd.org/Programs/Redefining-Value/TCFD/
Resources/Climate-Scenario-Analysis-Reference-Approach
Focus area 4: Formulating the climate transition plan and

setting the targets
A transition plan is an aspect of an entity’s overall strategy commitments, reporting companies will need to prepare
that outlines the company’s targets and actions for themselves to transition to a lower carbon economy.
its transition towards a lower carbon business model,
including actions such as reducing its greenhouse gas Disclosing a company’s transition plan is important.
emissions. It can be a challenge for companies to put This disclosure not only enhances the credibility of
together a strategy on how they intend to reduce their the company’s climate change commitments, but also
carbon footprint. provides information on how the company will adjust its
strategies or business models to reduce climate-related
China aims to reach peak carbon emissions by 2030 and is risks and capture climate-related opportunities, which in
committed to being carbon neutral by 2060.14 Meanwhile, turn may affect its enterprise value.
the Hong Kong SAR Government has pledged to achieve
carbon neutrality by 2050, and set out its strategy to The ISSB Board’s climate proposal requires a range of
achieve this in its Climate Action Plan 2050.15 To align disclosures about a company’s transition plan:
with these goals and help achieve the carbon reduction
Current and • Changes in strategy and resource allocation to address climate-related risks and
anticipated changes to opportunities, including plans and critical assumptions for legacy assets
its business • Direct and indirect adaptation and mitigation efforts, and
model
• How these plans will be resourced.
Climate-related • Process for review of the targets

targets • Amount of the emissions target to be achieved through emissions reductions, and
• Carbon offsets: the extent of usage; whether the carbon offsets are subject to third-party
offset verification or certification schemes, and if yes, which schemes; type of carbon
offsets; and any other factors relating to the credibility and integrity of the offsets.
Progress • Quantitative and qualitative information about the progress of plans disclosed in
prior reporting periods.
As the climate transition plan is about how a company In light of the complexities and uncertainties around
responds to climate-related risks and opportunities, the climate change, companies may need support in terms
transition plan should align with the company’s overall of identifying and implementing mitigation and adaptation
strategy. efforts, estimating the effects or outcomes of these
efforts, which can impact the setting of targets and
In addition, the transition plan describes the metrics the reviews of progress. As companies will need to disclose
company will monitor to track progress against its plans metrics, targets and progress compared with prior periods,
and targets. Those metrics should be aligned with cross- they may struggle to set targets that are achievable and
industry metrics, industry-based metrics, company-specific demonstrate improvements each year. In this regard,
metrics and related targets required by the ISSB Board’s companies can refer to guidance on transition plans and
climate proposal (refer to page 20 of this report for details). targets developed by the TCFD16 as a starting point.
14
‘China Maps Path to Carbon Peak Neutrality under New Development Philosophy’, Xinhua, 2021, http://english.www.gov.cn/policies/
latestreleases/202110/24/content_WS61755fe9c6d0df57f98e3bed.html
15
‘Hong Kong’s Climate Action Plan 2050’, Hong Kong SAR Government, 2021, https://www.climateready.gov.hk/files/pdf/CAP2050_booklet_en.pdf
16
‘Task Force on Climate-related Financial Disclosures: Guidance on Metrics, Targets and Transition Plans’, TCFD, 2021, https://assets.bbhub.io/company/
sites/60/2021/07/2021-Metrics_Targets_Guidance-1.pdf
Focus area 5: Determining and reporting on the metrics

Climate-related metrics support the measurement of risk exposures and inform primary users about how the company
tracks and manages climate-related risks and opportunities. The metrics required by the climate proposal may be relatively
new to companies in Hong Kong and therefore, much preparation work is required.
The ISSB Board’s proposals require disclosure of the following metrics and targets:
Table A
Type of metrics Metrics to be disclosed
1. Cross-industry The climate proposal requires the same categories of cross-industry metrics as in
metrics the TCFD guidance. Please refer to table B for details.
2. Industry-based Companies select the applicable industry-based metrics from Appendix B of the
metrics proposed standard; these metrics are derived from the SASB Standards.17
For companies which operate in multiple sectors, more than one set of industry-
based metrics may be required.
3. Other metrics When a metric has been developed internally, the general requirements proposal
requires the disclosure of:
• How the metric is defined, and any sources used to construct the metric
• Whether the measurement of the metric is validated by an external body and if so,
which body, and
• Explanations of the method used to calculate the targets and inputs to the
calculation, including significant assumptions and limitations.
4. Targets For each climate-related target, the following information must be disclosed:
• Metrics used to assess progress
• The specific target set
• Whether the target is an absolute or intensity target
• The objective of the target (e.g. mitigation, adaptation or conformance with sector
or science-based initiatives)
• How the target compares with those created in the latest international agreement
on climate change and whether it has been validated by a third party
• Whether the target was derived using a sectoral decarbonisation approach
• The period over which the target applies
• The base period from which progress is measured, and
• Any milestones or interim targets.
17
‘Appendix B – Industry-based disclosure requirements’, IFRS Foundation, accessed on 8 May 2022, https://www.ifrs.org/projects/work-plan/climate-related-
disclosures/appendix-b-industry-based-disclosure-requirements/
Target-setting is closely associated with the formulation of the climate transition plan as it is discussed at the beginning of
transition planning.
With respect to cross-industry metrics, the climate proposal prescribes that the following metrics be disclosed:
Table B
Categories of metrics Metrics to be disclosed
1. Greenhouse gas Consistent with the TCFD guidelines, the climate proposal requires the use of the
emissions Greenhouse Gas Protocol and disclosure of emissions on an absolute and intensity basis.
However, the proposal requires that additional details be disclosed.
For scope 1 and scope 2 emissions:

• Emissions for the consolidated group, and
• Emissions for associates, joint ventures, unconsolidated subsidiaries or affiliates; the
approach used to include emissions; and the reasons for the choice of approach.
For scope 3 emissions:

• Include upstream and downstream emissions in the measurement
• Disclose the categories included within the measurement to show which scope 3
activities have been included or excluded
• Explain the basis for measurement when including information provided by entities in
the value chain, and
• State the reason for omitting emissions from the measurement.
2. Transition risks The amount and percentage of assets or business activities vulnerable to transition
risks.
3. Physical risks The amount and percentage of assets or business activities vulnerable to physical risks.
4. Climate-related The amount and percentage of assets or business activities aligned with climate-
opportunities related opportunities.
5. Capital The amount of capital expenditure, financing or investment deployed towards

deployment climate-related risks and opportunities.
6. Internal carbon The price for each metric tonne of greenhouse gas emissions that a company uses
prices to assess the cost of its emissions.
An explanation of how the company is applying carbon prices in decision-making.
7. Remuneration The percentage of executive management remuneration recognised in the current

period that is linked to climate-related considerations.
A description of how climate-related considerations are factored into executive

remuneration.
If a metric or target is revised, the company is required Methodology selection: Methodological challenges
to explain the changes and the reasons therefor, and occur when estimating greenhouse gas emissions
to provide restated comparative figures unless it is of activities across the value chain including the
impracticable to do so. For metrics two to seven in Table unavailability of relevant data, defining an appropriate
B, the climate proposal requires companies to consider calculation approach for all scope 3 activities, and
the relationship between these metrics and the amounts addressing the potential risk of double counting
recognised and disclosed in the financial statements. when greenhouse gas emissions are aggregated
across entities.
Scope 3 emissions
In view of the increasing recognition that scope 3 Industry-led initiatives may help resolve these issues
emissions are a critical component of a company’s carbon by compiling relevant data, enhancing transparency and
footprint, the ISSB Board’s climate proposal goes beyond developing better practices.
the TCFD recommendations and requires the disclosure
Other cross-industry metrics
of scope 3 emissions. This aligns with the demands from
investor initiatives for the disclosure of such information. With the exception of emissions metrics, other cross-
In addition, as various jurisdictions announce their net-zero industry metrics are not currently required by the HKEX
pledges, they may require comprehensive carbon reporting ESG Reporting Guide and may be relatively new to Hong
from companies to track their carbon emission reduction Kong companies. As a result, companies should define
commitments. the metrics, set up processes and controls to collect data
that is relevant, reliable, and consistent with financial
Despite the importance of scope 3 emissions, the statements, and determine the methodologies and
disclosure of such information involves challenges around assumptions to use where appropriate.
data access and methodology selection as mentioned by
respondents in the TCFD’s 2021 survey:18,19 Industry-based metrics
The industry-based metrics in the ISSB Board’s proposals
Data access: Difficulties arise from collecting reliable are derived from the SASB Standards. In 2021, nearly half
and sufficiently granular primary data over the value of SASB reporters (48 percent) were domiciled in the US,
chain and in managing the volume of such data. and only 10.4 percent of SASB reporters were domiciled
Overcoming these difficulties requires significant in Asia Pacific.20 Therefore, the SASB Standards may be
resources and data management solutions. relatively new to Hong Kong companies. In the proposals,
the industry-based metrics are referenced to international
Companies may use secondary data or industry-
standards and definitions in order to improve their
average emissions factors where available.
international applicability. Companies adopting the ISSB
However, using such data presents challenges due
Board’s proposals will need to understand the industry-
to inadequate transparency around data quality and
based metrics, apply materiality judgements to the metrics,
the potential for uneven distribution of greenhouse
and adapt their existing data compilation processes to the
gas emissions within an industry.
metrics and/or set up new processes.
18
‘Metrics, Targets and Transitional Plans Consultation: Summary of Responses’, TCFD, 2021, https://assets.bbhub.io/company/sites/60/2021/08/Summary-of-
June-2021-Public-Consultation.pdf
19
‘Task Force on Climate-related Financial Disclosures: Guidance on Metrics, Targets and Transition Plans’, TCFD, 2021, https://assets.bbhub.io/company/
sites/60/2021/07/2021-Metrics_Targets_Guidance-1.pdf
20
‘Investor and Market Support’, SASB, accessed on 19 April 2022, https://www.sasb.org/about/global-use/#investor-market-support
Readiness of surveyed
Hong Kong companies
On 5 May 2022, HKCGI hosted a webinar, featuring speakers from KPMG and CLP, to raise awareness of the ISSB
Board proposals and gather feedback from the 125 participants on their companies’ readiness in adopting ISSB Board’s
proposals. The participants primarily comprised governance professionals from Hong Kong.
The results of the polling questions confirm that Hong Kong companies are facing similar challenges as outlined in
this report.
Only 7% and 4% of respondents adopted TCFD recommendations and SASB standards,

respectively. This implies that many companies are likely to experience a significant gap
between current climate reporting and the ISSB Board’s climate proposal, which builds on TCFD
recommendations and SASB standards.
The results of the survey also show that a variety of approaches to identifying climate-related
risks and opportunities are being taken by companies in Hong Kong. Nearly a quarter (22%)
reported that their companies currently identify these through an internal management review, but
this was closely followed by stakeholder engagement (excluding investors and lenders) (19%),
engagement with investors and lenders (16%), industry review (14%) and peer benchmarking
(13%).
Just over a third of respondents (34%) did not have a plan to conduct a scenario analysis,
while 25% have plans to prepare one within one to two years. Only 17% of respondents advised
that their companies had already prepared a scenario analysis, while 11% are currently preparing one.
Key challenges in performing a scenario analysis were found to be sourcing relevant data (29%),
(25%), selection and application of methodologies (21%), development
lack of expertise resources
of relevant scenarios (19%) and lack of internal buy in (6%).
A large majority (86%) confirmed that their companies have not set a climate transition plan,
while 47% onsider that their companies are unlikely to set one.
Meanwhile, around a third of respondents (37%) have not determined what climate related
metrics are to be reported on, with 28% expressing concerns about how the company will
compare with its peers.
The top three challenges arising from the reporting of scope 3 emissions are: hard to get relevant
data(37%), lack of internal expertise/resources (23%), followed by the selection and application
of methodologies (17%).
In terms of support, respondents identified internal and external resources and expertise (24%),
further industry guidance (21%) and more practical guidance, e.g. case studies (21%), as their
most pressing needs.
Conclusion and
next steps for companies
Climate change is a board-level strategic issue and a failure Educate the board: As the board takes accountability
to take appropriate steps exposes a company to material for monitoring and managing climate-related risks
business risks. Companies preparing climate reporting and opportunities, it should understand the latest
under the ISSB Board’s climate proposal need to take a developments in climate issues and the related
strategic lens and let the reporting follow from that. They reporting landscape, the company’s potential
should not treat this as a box-ticking exercise, but as a exposure to climate-related risks and opportunities,
framework to guide business and investment decisions. and the potential implications on the company’s
strategy and business model.
As discussed in this report, the processes underpinning the
ISSB Board’s climate reporting involve significant efforts.
Serious implementation of these processes requires Governance professionals should
commitment from leadership and others across the educate the board about the emerging
company, as well as appropriate resources. A light touch climate reporting requirements and
approach will not provide investors with useful information the potential impacts and challenges. Various
and could result in substantial risk management issues if a platforms such as HKEX’s ESG Academy
company fails to fully understand and act on the impacts of and TCFD Knowledge Hub provide useful
climate change on its business. resources in this regard.
The disclosure landscape is evolving rapidly and the

pressure to disclose more is growing. Regulators and
investors are demanding increased disclosures on how a Integrate climate issues into governance structure:
company’s strategy and business model is responding to The board should integrate climate-related issues
climate-related risks and opportunities. Recognising that into strategy and decision-making processes and
such disclosure is likely to become mandatory, and that enhance board-level oversight over monitoring
the processes behind the scenes are complex and time- and management of climate-related risks and
consuming, companies that have not yet started compiling opportunities. This helps to secure commitment and
these disclosures and net zero planning should do so support from the leadership.
without delay.
As closing thoughts for companies starting out on the Governance professionals may assist
journey, we recommend the following: Establish
the board aincross-functional team: A
enhancing the current
governance structure, including the
roles of the board and management.
Establish a cross-functional team: A cross-functional Expand systems, processes and controls:

team is important to both act on climate issues Companies will need processes and controls to
and report on the company’s climate responses. quantify financial effects of climate issues, conduct
A diverse team helps to obtain buy-in and support climate-related scenario analysis and report on
from across the organisation. It also brings together metrics. Companies should engage with current
different skill sets. process owners to understand how information is
being defined, captured and reported and where
there are data gaps and control gaps.
For instance, Sustainability
professionals have an
understanding of climate issues. The cross-functional team may need
Strategy professionals and risk management to assist the board in identifying
experts can advise on the impacts on these gaps and expanding existing
strategy and business models. Finance systems, processes and controls to ensure
professionals can help understand and data integrity and avoid duplication between
quantify the financial effects and connect different types of reporting.
climate and financial reporting.
Governance professionals may assist

the board in establishing the multi-
disciplinary team to implement the
needed processes and tackle the challenges
described in this report.
About KPMG China

KPMG China is based in 31 offices across 28 cities with around 14,000 partners and staff in Beijing, Changsha, Chengdu,
Chongqing, Dalian, Dongguan, Foshan, Fuzhou, Guangzhou, Haikou, Hangzhou, Hefei, Jinan, Nanjing, Ningbo, Qingdao,
Shanghai, Shenyang, Shenzhen, Suzhou, Taiyuan, Tianjin, Wuhan, Xiamen, Xi’an, Zhengzhou, Hong Kong SAR and Macau
SAR. Working collaboratively across all these offices, KPMG China can deploy experienced professionals efficiently,
wherever our client is located.
KPMG is a global organisation of independent professional services firms providing Audit, Tax and Advisory services. We
operate in 144 countries and territories with more than 236,000 partners and employees working in member firms around
the world. Each KPMG firm is a legally distinct and separate entity and describes itself as such. KPMG International Limited
is a private English company limited by guarantee. KPMG International Limited and its related entities do not provide
services to clients.
In 1992, KPMG became the first international accounting network to be granted a joint venture licence in mainland
China. KPMG was also the first among the Big Four in mainland China to convert from a joint venture to a special general
partnership, as of 1 August 2012. Additionally, the Hong Kong firm can trace its origins to 1945. This early commitment to
this market, together with an unwavering focus on quality, has been the foundation for accumulated industry experience,
and is reflected in KPMG’s appointment for multi-disciplinary services (including audit, tax and advisory) by some of China’s
most prestigious companies.
About HKCGI
(Incorporated in Hong Kong with limited liability by guarantee)
The Hong Kong Chartered Governance Institute (HKCGI), formerly known as The Hong Kong Institute of Chartered
Secretaries (HKICS), is the only qualifying institution in Hong Kong and the Mainland of China for the internationally
recognised Chartered Secretary and Chartered Governance Professional qualifications.
With over 70 years of history and as the Hong Kong/China Division of The Chartered Governance Institute (CGI), the
Institute's reach and professional recognition extends to all of CGI's nine divisions, with more than 40,000 members and
students worldwide. HKCGI is one the fastest growing divisions of CGI, with a current membership of over 6,800, 300
graduates and 3,000 students with significant representations within listed companies and other cross-industry governance
functions.
Believing that better governance leads to a better future, HKCGI’s mission is to promote good governance in an increasingly
complex world and to advance leadership in the effective governance and efficient administration of commerce, industry
and public affairs. As recognised thought leaders in our field, the Institute educates and advocates for the highest standards
in governance and promotes an expansive approach which takes account of the interests of all stakeholders.
Better Governance. Better Future.
For more information, please visit www.hkcgi.org.hk.
About CLP
The CLP Group is one of the largest investor-owned power businesses in Asia Pacific with investments across Hong
Kong, Mainland China, Australia, India, Southeast Asia and Taiwan. Hong Kong-listed CLP Holdings Limited is the holding
company for the CLP Group, which has a diversified portfolio of generating assets that uses a wide range of fuels including
coal, gas, nuclear and renewable sources.
Through CLP Power Hong Kong Limited, the Group operates a vertically integrated electricity supply business that provides
a highly reliable supply of electricity to 80% of Hong Kong’s population. In Mainland China, the CLP Group is the largest
external independent power producer with a focus on low-carbon energy. In Australia, the Group’s wholly-owned subsidiary
EnergyAustralia is a leading integrated energy company, providing gas and electricity to about 2.44 million households
and businesses. Apraava Energy (formerly known as CLP India) is one of India’s biggest renewable energy producers with
operations in power generation and transmission.
CLP Holdings is included in the Global Dow – a 150-stock index of the world’s leading blue chip companies, the Dow Jones
Sustainability Asia Pacific Index (DJSI Asia Pacific), the Dow Jones Sustainability Asia Pacific 40 Index (DJSI Asia Pacific
40), the Hang Seng Corporate Sustainability Index Series and the FTSE4Good Index series.
Contact us
KPMG China
Wei Lin Patrick Chu
Partner, Head of Environmental, Partner, National Head of ESG
Social and Governance Reporting and Assurance
KPMG China KPMG China
T: +86 (21) 2212 3508 T: +86 (10) 8508 5705
E: [email protected] E: [email protected]
Pat Woo Irene Chu

Partner, Head of ESG, Hong Kong Partner, Business Reporting and Sustainability
Global Co-Chair, Sustainable Finance, KPMG China
KPMG IMPACT T: +852 2978 8151
KPMG China E: [email protected]
T: +852 3927 5674
E: [email protected]
Eddie Ng Derek Yuen

Partner, Business Reporting Partner, Business Reporting
and Sustainability and Sustainability
T: +852 2143 8874 T: +852 2978 8173
Catherine Chung Laura Yang

Associate Director, Business Reporting Associate Director, Business Reporting
and Sustainability and Sustainability
T: +852 2685 7677 T: +86 (21) 2212 2402
HKCGI
Ellie Pang FCG HKFCG Mohan Datwani FCG HKFCG(PE)
Chief Executive Deputy Chief Executive
T: +852 2830 6029 T: +852 2830 6012
CLP
Vivian Au
Director - Corporate Affairs (Communications)
T: +852 2678 8189
E: [email protected]
home.kpmg/cn/socialmedia
For a list of KPMG China offices, please scan the QR code or visit our website:
https://home.kpmg.com/cn/en/home/about/offices.html
The information contained herein is of a general nature and is not intended to address the circumstances of any particular individual or entity. Although we endeavour to provide accurate and timely
information, there can be no guarantee that such information is accurate as of the date it is received or that it will continue to be accurate in the future. No one should act upon such information
without appropriate professional advice after a thorough examination of the particular situation.
© 2022 KPMG Huazhen LLP, a People’s Republic of China partnership, KPMG Advisory (China) Limited, a limited liability company in Mainland China, KPMG, a Macau (SAR) partnership, and KPMG,
a Hong Kong (SAR) partnership, are member firms of the KPMG global organisation of independent member firms affiliated with KPMG International Limited, a private English company limited by
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The KPMG name and logo are trademarks used under license by the independent member firms of the KPMG global organisation.
Publication number: HK-ESG22-0001
Publication date: July 2022
This publication contains copyright © material of the IFRS® Foundation. All rights reserved. Reproduced by KPMG Huazhen LLP, KPMG Advisory (China) Limited, KPMG and KPMG with the
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Climate Change

The International Sustainability Standards Board and its proposals 08

Focus area 1 Adopting the ‘Enterprise Value’ approach to 12

Focus area 4 Formulating the climate transition plan and

Readiness of surveyed Hong Kong companies 24

Conclusion and next steps for companies 26

About KPMG, HKCGI and CLP 28

“ The development of global baseline standards by

Adopting the Quantifying the Conducting Formulating the Determining and

“ The IFRS Sustainability Disclosure Standards signal a seismic change in

“ The governance professional which our Institute represents is at the forefront

Ernest Lee FCG HKFCG(PE)

Climate change reporting by surveyed companies in Hong Kong

23% Lack of internal expertise/resources

The selection and application of

Internal management review 22%

86% of respondents stated that

their companies have not set a Resources and expertise

21% Further industry guidance

47% consider that their companies

David Simmonds FCG HKFCG

Proposal 1: Draft IFRS S1 General Requirements for Disclosure of

Proposal 2: Draft IFRS S2 Climate-related Disclosures

Next steps for the ISSB Board

The ISSB Board’s non-mandatory guidance

The most recent pronouncements of other

“ As Asia’s largest listed exchange operator and market regulator, HKEX is

Adopting the ‘Enterprise Value’ approach

These primary users are existing and potential investors,

The ‘Enterprise Value’ approach to

Quantifying the current and anticipated

Subject Information to be disclosed

Impacts on the financial position include disclosing:

Examples of impacts on the financial performance may include the following:

Focus area 3: Conducting climate-related scenario analysis

Subject Information to be disclosed

When using other assessments

Concerns about disclosing the results of scenario

Focus area 4: Formulating the climate transition plan and

Subject Information to be disclosed

Climate-related • Process for review of the targets

Focus area 5: Determining and reporting on the metrics

For scope 1 and scope 2 emissions:

For scope 3 emissions:

5. Capital The amount of capital expenditure, financing or investment deployed towards

An explanation of how the company is applying carbon prices in decision-making.

7. Remuneration The percentage of executive management remuneration recognised in the current

A description of how climate-related considerations are factored into executive

Only 7% and 4% of respondents adopted TCFD recommendations and SASB standards,

of relevant scenarios (19%) and lack of internal buy in (6%).

The disclosure landscape is evolving rapidly and the

Establish a cross-functional team: A cross-functional Expand systems, processes and controls:

Governance professionals may assist

About KPMG China

Better Governance. Better Future.

For more information, please visit www.hkcgi.org.hk.

Pat Woo Irene Chu

Eddie Ng Derek Yuen

Catherine Chung Laura Yang