Alaya Consulting Study Finds Only 12.5% of Hong Kong Large-Cap Companies Fully Disclosed Scenario-Linked Financial Effects Ahead of Upcoming Mandatory Reporting Cycle
- Written by: Telegraph Magazine
The study reviewed the 2025 climate-related disclosures of 112 constituents of the Hang Seng Composite LargeCap Index, focusing on whether companies provide scenario-based information that is quantitative, financially connected and decision-useful for investors and other stakeholders.
The research found that while climate-related disclosure has become more common among large-cap companies, supported by the introduction of HKEX's new climate-related disclosure requirements under Part D of the ESG Code, many issuers remain at an early stage in translating climate risk awareness into quantified analysis. Companies frequently identify climate risks, describe governance arrangements and refer to climate scenarios, but fewer disclose the numerical outputs, financial implications or strategic conclusions needed to assess business resilience under different climate futures.
Key findings include:
- 93% of companies disclosed some form of climate scenario analysis, but the depth of disclosure varied significantly;
- 25% fully quantified physical risks;
- 19% fully quantified transition risks; and
- only 12.5% fully disclosed scenario-linked financial effects.
The findings show a clear gap between climate risk recognition and decision-useful quantification. Many companies now acknowledge climate-related risks and opportunities, but fewer explain what those risks mean in measurable business or financial terms.
Tony Wong, Founder of Alaya Consulting, stated: "Climate scenario analysis should not be treated as a reporting box-ticking exercise. Its real value lies in helping companies understand how climate-related risks and opportunities may affect their assets, operations, cash flows and long-term strategy."
"Our study shows that Hong Kong large-cap companies are increasingly aware of climate scenario analysis, but the market now needs to move from narrative disclosure to numbers. As HKEX's mandatory climate-related disclosure requirements begin to apply to relevant issuers, quantitative and financially connected analysis will be essential for investors, boards and management teams to assess resilience and make informed decisions."
The study highlights that financial effects remain the weakest area of disclosure. While some companies quantify risk exposure — such as assets exposed to flooding, carbon pricing or transition risks — only a smaller group translates those exposures into potential impacts on revenue, operating costs, capital expenditure, asset values, profitability or cash flows.
This matters because quantitative scenario analysis helps companies and report users understand the magnitude, timing and business relevance of climate risks. Without quantification, disclosures may identify that a company faces climate-related risks, but provide limited insight into whether those risks are material, manageable, increasing, or already reflected in strategic and financial planning.
The research comes at an important time for the Hong Kong market. With mandatory climate-related disclosure requirements applying to relevant large-cap issuers for financial years commencing on or after 1 January 2026, companies will need to strengthen scenario analysis capability and improve the connectivity between sustainability reporting, financial planning and business strategy.
According to Alaya Consulting, companies should prioritise:
- selecting relevant physical and transition climate scenarios;
- disclosing key assumptions and time horizons;
- quantifying risk exposure by asset, geography, business unit or portfolio, where relevant;
- assessing potential financial effects under different scenarios; and
- linking scenario outputs to resilience planning, investment decisions and capital allocation.
"The next stage of climate disclosure is about usefulness," added Mr. Wong. "Companies that can explain not only what climate risks they face, but how those risks may affect financial performance and strategic resilience, will be better positioned to meet regulatory expectations and respond to investor demand for credible climate-related information."
To obtain the full report or arrange a discussion on FY2026 climate disclosure readiness, please contact Alaya Consulting.
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About Alaya Consulting
Alaya Consulting is a specialist ESG consultancy focusing on climate-related disclosure, ESG advisory, pre-assurance, data verification and ratings enhancement. Its advisory services cover evolving international and market-specific requirements, including climate-related disclosure requirements, supply chain-related regulations and sustainability reporting developments.
With offices in Hong Kong and Shenzhen, we advise clients across a wide range of industries, including real estate, environmental services, utilities, renewable energy and pharmaceuticals. We are an ISSB training partner, and the ESG Partner of the Hong Kong ESG Reporting Awards (HERA).
Since 2014, Alaya has contributed to the achievement of SDG 12.6 by advising on nearly 1,000 sustainability disclosure projects. Our latest approved science-based target is to reduce Scope 1 and 2 GHG emissions by 42% by 2030. Alaya has also achieved a CDP climate change score of B, reflecting our continued commitment to climate transparency and performance.
