HK ESG reporting is just box-ticking

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Investors in Hong Kong have interest in sustainable investing, but among locally-listed companies a ‘box-ticking attitude’ toward ESG reporting remains prevalent, according to industry reports.

SAR-listed companies are slow to improve ESG reporting practices, according the latest report by consultancy firm EY.

The consultant analysed ESG reports from 1,200 Hong Kong-listed companies and found that a ‘box-ticking’ approach is the main method of reporting information related to ESG.

Around 68% of listed companies use the perfunctory approach, which involves reporting information with low or even no relevance to their business or sector. The situation has improved only slightly from the end of financial year 2016, when 71% of surveyed companies reported information considered too general.

Moreover, only 7% of companies had a clear strategic priority for ESG issues and a plan for execution. Half of all listed companies did not even mention ESG integration in their business strategies, data compiled by EY shows.

The majority (90%) of listed companies did not disclose ESG improvement targets to investors or other stakeholders.

Demand from HK investors

The Schroders Global Investor Study 2018 polled 550 investors in the SAR and found that 82% of them believe the importance of sustainable investing is higher than in five years ago.

Around 60% of those surveyed said they increased allocation to sustainable investments over the past five years and  sustainable assets represented an average of 25% in their portfolios.

The preference for investing in sustainable assets increases as investors feel they are becoming more sophisticated. The survey found expert or advanced investors allocate 28% on average to sustainable investments while those who considered themselves a beginner invested only 19%.

More than half of investors surveyed (58%) expected higher profitability from companies employing sustainable practices  and 46% responded that sustainability equates to best-in-class companies.

A separate survey from UBS Wealth Management found that 85% of high net worth individuals in Hong Kong say they are interested in sustainable investing, FSA reported earlier.

But actual investment in ESG assets remains low. The bank suggested that fees higher than traditional products may be the reason.

Percentage of companies that avoid ‘box-ticking” approach

Industry

% of companies
Utilities

71%

Financial services

51%
Telecommunications

50%

Real estates and constructions

49%
Information technology

47%

Industrials

41%
Conglomerates

40%

Energy

39%
Consumer services

37%

Raw materials

37%
Source: EY. The above table shows top 10 only.

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