ESG Trends in Hong Kong 2021

Investment decisions are made after meticulous considerations of projected profits and conceivable risks. For sustainability, investors and other stakeholders resort to analyzing the ESG and have made it a major factor determining the investments in a particular establishment.

The ESG, which represents the environmental, social, and government data, gives insight and is an accurate index of performance. Although the ESG consideration just began in recent times, it has proven to be a better indicator of the chances of success or failure of an investment.

Moreover, studies have shown that funds that Integrate ESG deliberations experience a greater level of growth than the ones that do not put ESG into consideration. More countries in Asia have also been more receptive to ESG incorporation and have ESG reports inclusive of the documents tended to potential investors.

ESG in Hong Kong

Hong Kong is a city whose economy is deep-seated in trade. There is a prevalence of financial services such as banking and insurance, while real estate and tourism follow closely. For sustainability in investments, the Hong Kong Exchanges and Clearing Limited (HKEK), in 2019 amended the ESG requirements to enhance the ESG framework, centralize the market standards for Hong Kong, and set a new pace for ESG integration In Asia.

These changes include:

• Modification in disclosure requirements: Some things have been made mandatory in the ESG disclosure requirements, such as listed company’s board statements on ESG consideration and application of reporting principles. 

• Hastening the ESG publication report restricting the deadline to five months after the end of a financial year.

• Publication of significantly important climate matters which might have an impact on issuers.

• Alteration of key performance indicators related to the environment and its inclusion in the disclosure of relevant targets.

These changes are driven by the need to promote accountability, be on par with international practice, match stakeholders’ expectations, and boost their confidence in investments.

HKEK has also taken a step further to ensure all listed companies are equipped with the knowledge of ESG and its application by the provision of training on ESG, materials, and numerous resources to help directors formulate ESG strategies and ease ESG reporting.

The Stock Exchange of Hong Kong Limited, a subsidiary of the HKEK, has also been working closely with the Securities and Futures Commission (SFC) to strengthen ESG disclosure rules for listed companies. The SFC intends to set up an industry group that would bring experts together to discuss environmental and climate risk matters and how it affects sustainable finance. The SFC also emphasized climate change risk management in asset management by providing practical guidance on how this can be organized.

As regards ESG integration, the listed companies in Hong Kong are still trudging internationally. The HKEK aims to attain transcends compliance in reporting; it seeks a positive change in reception to ESG. It is anticipated that these improvements, training, and guidance for listed companies will likely step up Hong Kong’s status on a global level.