ESG a key focus for mainland, Hong Kong firms

Most companies plan to step up socially responsible investing, says report unveiled at AFF

A majority of companies on the Chinese mainland and in Hong Kong plan to step up environmental, social and governance-related investments, a report showed on Jan 10.

In a survey of senior executives, 89 percent said their organizations plan to increase investments in ESGrelated programs and initiatives over the next five years, according to a joint research paper from accounting and consultancy firm PwC and the Hong Kong Trade Development Council.

Fifty-six percent of the respondents said their ESG-compliant investments will rise significantly or considerably, according to the report, titled “ESG Investing: Challenges and Opportunities for Hong Kong”.

ESG investing incorporates environmental, social and corporate governance factors in long-term investments and sustainability.

“The strong financial commitment … highlights the fundamental belief in the importance of ESG to business strategy,” said Elton Yeung, vice-chairman of PwC China, as he presented the report at the 15th Asian Financial Forum, or AFF. It was held online on Jan 10 and 11 under the theme “Navigating the Next Normal towards a Sustainable Future”. China Daily was a premium media sponsor.

After surveying 105 senior executives on the Chinese mainland and in Hong Kong in December, the report found that while ESG criteria are being considered by almost every business, the big focus is on the social and corporate governance elements.

ESG strategic decision-making is also still primarily being driven through a compliance lens rather than value-added activities, the report said.

“As companies deploy this investment, they will be looking for sustained outcomes from their spending. Hong Kong as a whole will benefit from this positive impact,” Yeung said.

The city’s mature financial market, international experience and professional services industry makes Hong Kong very competitive in supporting the growth of ESG investing, he said.

Updating tax policies and subsidy programs were among the top priorities that respondents thought Hong Kong should work on to encourage more ESG-compliant and sustainable investing, Yeung said.

More than half of the respondents also said the government should provide guidance on identifying ESGcompliant projects, or publish a list of ESG or sustainable financial products to increase their visibility.

Noting Hong Kong’s position as the green finance center in the Guangdong-Hong Kong-Macao Greater Bay Area and efforts like the launch of the Greater Bay Area Green Finance Alliance in 2020, Yeung said Hong Kong has been instrumental in advancing the ESG agenda.

Experts at the AFF also discussed in a panel session the opportunities arising from ESG-related investments and sustainability.

Henry Shi, a member of the Executive Committee of Haitong International Securities Group, said the ESG finance market in China has been growing in recent years.

For example, data from the People’s Bank of China, the central bank, showed that green loans and green bonds in the country totaled $1.8 trillion and $125 billion respectively by the end of 2020, ranking as the world’s largest and second-largest.

In Hong Kong, there were 104 green bond issuances in 2021, raising $35 billion, Shi said.

“The shift to a better way of longterm interest actually affects all of us because carbonization and global warming affect all of us,” said Saker Nusseibeh, CEO of the international business of US-based global asset manager Federated Hermes.

“The business and investment community have a role to play because that is the opportunity for the shift to the green economy,” Nusseibeh said.