A majority of surveyed business executives of Hong Kong-listed companies are yet to integrate environmental, social and governance (ESG) as part of their core business strategy, while most indicate they see value in it, finds a joint survey by KPMG, CLP and the Hong Kong Institute of Chartered Secretaries (HKICS).
The report, titled ESG: A view from the top, features a survey of more than 200 senior executives of Hong Kong-listed companies on how they are addressing ESG concerns and driving its development in the region.
It finds that nearly 70 percent of surveyed business executives acknowledge the value of ESG in their businesses. Thirty-eight percent of respondents think ESG is essential as business success depends on environmental and social resources, while 30 percent note that it is good for business in terms of attracting investors seeking long-term sustainable investments.
However, only 37 percent of respondents say that they have integrated ESG issues into their strategic planning, and 41 percent indicate that it has been considered in boardroom discussions. While ESG reporting has become mandatory since 2016, these findings indicate that it is still a peripheral issue for some companies.
The survey finds that three key barriers are affecting more than one third of business executives: limited ESG knowledge; ESG issues are not considered to have a significant impact on the business; and that ESG is expected to deliver limited short-term/immediate returns.
Pat-Nie Woo, Partner, Business Reporting and Sustainability, KPMG China, says: “A number of studies have found that strong ESG performance can create competitive advantages, including a more stable investor base, lower cost of capital and better access to financing, improved employee engagement and customer loyalty. These benefits are vital to the companies seeking to create long-term value and strengthen their corporate performance.”
David Simmonds, Group General Counsel & Company Secretary, CLP Holdings, and a HKICS council member, says: “A company can only survive if it conducts its business in a manner which is consistent with the legitimate interests and well-being of the communities in which it operates, not just those of its shareholders. To achieve that requires good governance and due regard to be paid to the environmental and social impact of business decisions and the sustainability of business models.”
In addition, boards play an important role in terms of driving ESG development and managing their ESG-related risks and opportunities. The survey finds that 43 percent of respondents expect to increase their investment in improving their company’s tracking of ESG issues and related communication to the board in the next three years. However, only 13 percent of respondents indicate they expect to add board member(s) with specific ESG-related skills/experiences to improve board oversight of ESG issues.
April Chan, Past President and Chairman of Technical Consultation Panel, HKICS, says: “ESG issues should be properly addressed in a company’s risk management processes and regularly communicated to the board, no matter if they are identified as strategically significant or material. Rather than viewing them just as a risk, the board should also encourage management to focus on the potential ESG-related opportunities relating to innovation, disruption and value creation.”
It is critical for companies to develop a purposeful culture for ESG, where employees can play a role in contributing to the mission of the company, and have a positive impact on customers and the local community, the report states. Setting an appropriate “tone at the top” can nurture a corporate culture that gives priority to integrity, ethical standards and long-term sustainable value creation. Meanwhile, the board should have effective oversight by focusing their efforts on addressing the strategically significant ESG issues, and drive positive change more effectively.
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The survey had a total of 212 respondents, comprising either C-suite or senior management of listed companies in Hong Kong. The survey was anonymous, and was conducted from February to April 2018.
KPMG China operates in 19 cities across China, with around 12,000 partners and staff in Beijing, Beijing Zhongguancun, Changsha, Chengdu, Chongqing, Foshan, Fuzhou, Guangzhou, Hangzhou, Nanjing, Qingdao, Shanghai, Shenyang, Shenzhen, Tianjin, Wuhan, Xiamen, Xi’an, Hong Kong SAR and Macau SAR. With a single management structure across all these offices, KPMG China can deploy experienced professionals efficiently, wherever our client is located.
KPMG is a global network of professional services firms providing Audit, Tax and Advisory services. We operate in 154 countries and territories and have 200,000 people working in member firms around the world. The independent member firms of the KPMG network are affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. Each KPMG firm is a legally distinct and separate entity and describes itself as such.
In 1992, KPMG became the first international accounting network to be granted a joint venture licence in mainland China. KPMG China was also the first among the Big Four in mainland China to convert from a joint venture to a special general partnership, as of 1 August 2012. Additionally, the Hong Kong office can trace its origins to 1945. This early commitment to the China market, together with an unwavering focus on quality, has been the foundation for accumulated industry experience, and is reflected in the Chinese member firm’s appointment by some of China’s most prestigious companies.
CLP Holdings Limited, a company listed on the Stock Exchange of Hong Kong, is the holding company for the CLP Group, one of the largest investor-owned power businesses in Asia Pacific. Through CLP Power Hong Kong Limited, it operates a vertically-integrated electricity supply business providing a highly-reliable supply of electricity to 80% of Hong Kong’s population.
CLP’s diversified portfolio of generating assets in Asia Pacific uses a wide range of fuels including coal, gas, nuclear and renewable sources. CLP is one of the largest external investors in the Mainland’s renewable energy sector. In India, it is one of the biggest renewable energy producers and among the largest foreign investors in the electricity sector. In Australia, its wholly-owned subsidiary EnergyAustralia is one of the largest integrated energy companies, providing gas and electricity to over 2.6 million households and businesses.
CLP is listed on the Global Dow – a 150-stock index of the world’s leading blue-chips, the Dow Jones Sustainability Asia Pacific Index (DJSI Asia Pacific), the Dow Jones Sustainability Asia Pacific 40 Index (DJSI Asia Pacific 40), Hang Seng Corporate Sustainability Index Series and MSCI Global Sustainability Index Series.
HKICS was first established in 1949 as an association of Hong Kong members of The Institute of Chartered Secretaries and Administrators (ICSA) of London. It was a branch of ICSA in 1990 before gaining local status in 1994 and has also been ICSA’s China/Hong Kong Division since 2005.
HKICS is a founder member of Corporate Secretaries International Association (CSIA) which was established in March 2010 in Geneva, Switzerland. In 2017, CSIA was relocated to Hong Kong in which it operates as a company limited by guarantee. CSIA aims to give a global voice for corporate secretaries and governance professionals.
HKICS has over 5,800 members and 3,200 students.
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