Report: ESG remains ‘peripheral’ to HK companies

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Lack of short term returns are one reason why many Hong Kong-listed companies do not integrate ESG into strategic planning, according to a report by KPMG China.

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Integration of ESG into core business processes in listed Hong Kong companies remains low. Although the local bourse has required all listed companies to publish an annual ESG report since 2016, only 37% of companies have integrated ESG issues into strategic planning, the report said.

The report, conducted earlier this year, surveyed 212 senior managers in Hong Kong-listed companies, including board members, CEOs, and company secretaries.

While the development of integrating ESG is still at an early stage in Hong Kong, some companies simply fulfill the compliance requirements and adopt a “box-ticking approach” when reporting ESG information, the report said.

Senior executives cited several obstacles in addressing ESG issues, such as lack of motivation because expectations are that short-term financial returns would be low.

The report said the barriers are mainly due to pressure created by investors who care more about quarterly earnings reports and their investment vehicles that are valued on a daily basis.

Although only a limited number of companies actively integrate ESG practices into their operations, business leaders are aware of the correlation between ESG and company valuation.

Around half of the respondents believe addressing ESG issues can help enhance corporate reputation, lower waste and costs from improved operational efficiencies, and improve risk management.

However, less than half of the respondents associate ESG initiatives with other long-term benefits. Only 36% believe ESG will provide opportunities for growth and innovation.

Additionally, less than half (48%) of respondents reported that they agree ESG-focused companies tend to outperform their peers. They were mainly respondents from larger companies with a capitalisation greater than HK$10bn ($1.27bn).

Among 11 industry sectors in Hong Kong, ESG was expected to have the most significant near-term impact on energy companies.

Nearly 55% of respondents who work in the energy industry said ESG issues are affecting their operations today and an additional 22% believe ESG will impact their business in the next 1-2 years.

 

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