Michele Leung, Green Finance Advisor of Friends of the Earth (HK)
Social pillar within ESG world,
depending on the materiality and relevancy to the industry, would cover a wide
variety of factors, including but not limited to labour management, supply
chain labour standards, health and safety, product safety and privacy and data
security. These social factors have often been downplayed or ignored, due to
its nature of hard to quantify and the perception of social pillar is less
While the measurement of social
factors is still open for discussion, there is improving transparency of
corporate ESG disclosure, hence more robust assessment can be done nowadays.
For example, under labour management, the evaluation can be based on the number
of employees (including part time and contract workers), turnovers and layoffs,
percentage of workforce covered by trade unions, available benefits to employees,
any events of strikes, and external recognition such as employer of choice etc.
These indicators are being compared to the industry’s best practices, while
taken into consideration of any controversies (defined as incidents negatively
impact its stakeholders), then one would deduce whether the company outperforms
or underperforms its peers within same industry group.
Regarding the financial relevancy,
among many industry research papers, one found governance pillar scores proved
to be far more significant than environmental and social pillars over a
relatively short period in terms of their impact of profitability and
systematic risk, yet the environmental and social factors were more significant
over longer periods^. It explained the social factors are more related to event
risks, such as health and safety or data privacy issues, witnessed in the stock
plunges resulting from data breaches at Facebook and Equifax. It also confirmed social pillar was the most
significant in the consumer discretionary sector. In fact, when time got much
stressful and tough, especially in the recent year, it is observed that social
pillar has become an increasingly important consideration when analyzing the
company’s financial performance.
The U.S. Bureau of Labor Statistics
reported that over 47 million Americans quitted their jobs in 2021, which was
also known as the Great Resignation. The pandemic caused the workers to rethink
about their pay, job satisfaction, health and safety, as well as career
choices. It is a global issue and reflects the structural risk of the industry
that depends on large work force. From cost perspective, these high turnovers
and low retention would lead to higher operational cost and lower margin. It is
also true that employees are more willing to help their employers when time is
tough if they have been valued and treated well.
In fact, according to CFA Institute’s
Financial Analysts Journal, from the period of 1984-2020, an equal-weighted
portfolio of companies that treat their employees the best earns an excess
return of 2% to 2.7% per year. The result seemed to suggest the stock market
undervalues employees’ satisfaction.*
Closer to home, we are seeing some
tech giants are being scrutinized by the regulatory on the privacy and cyber
security issues. For example, with the China Personal Information Protection
Law (PIPL) that targeted at personal information protection, these tech companies
are now required to have a robust data privacy framework. Coupled with the earlier
anticompetitive crackdown and the order to remove the gaming and digital
content that’s harmful to the minors, these clampdowns and social concerns have
weighed on the stocks’ performances. There are also some
textiles and apparel companies that being alleged of forced labour in Xinjiang region
and North Korea. In addition to supply chain disruptions, they are facing
reputational damage. Investors that have
strong opposition on modern slavery have also divested away from those
companies as a result.
These impacts are real and does come
with a cost from financial perspective. Social pillar within ESG world should
not be ignored. On the positive side, we are seeing more corporates are now
taking more social responsibility, from establishing better labour standards in
regard to employee protections and benefits and supply chain management.
Kong SAR government is proposing amendments, including higher levy, to the
Plastic Shopping Bag Charging Scheme. While some may argue that higher levy cannot
help reduce plastic waste, no one should deny the fact that plastics waste are harmful
to our environment. Noticeably, plastic wastes was the third largest source of waste
for Hong Kong, accounting for 21% of the city’s municipal solid waste. Plastic
bags are just one form of plastic waste. The disposal of plastic bottles is
another issue that the government needs to address.
When compared with other cities, Hong Kong has low plastic recycling rate. This
could be explained by a few key factors including the lack of convenient recycling
facilities in Hong Kong and the low financial incentives for plastics. For plastic
bottles the recycling has been largely driven by the private sector and consumers.
The government has been slowly reacting. We welcome the rollout of the Reverse
Vending Machine Pilot Scheme by the Environmental Protection Department started
last year. However the number of reverse vending machines on the market is limited
and their geographical coverage is insufficient. Moreover, the financial
incentive for recycling is unattractive at HK$0.1 per bottle, which is the
lowest in the world according to Green Queen.
The use of
plastics and the associated wastes generated is threatening our environment and
the sustainability of our economy. But these threats could be translated into
opportunities. To address the challenges from the plastic waste, we need to
mobilize capital in both the private sector and the public sector. The role of
government is critical. With the right regulations, the supportive policies and
proper public finance mechanism, private investments would be incentivized to
tackle the issues. The Global Plastic Action Partnership published an
investment toolkit to demonstrate a series of case studies of cooperation between
private and public sectors to create circular economy for plastics.
we urge the Hong Kong SAR government to step up up its efforts not only in
tackling plastic wastes but also in other environmental challenges. We are
looking forward to the government’s sustainability strategy, plan and execution
roadmap for the medium and long term.
與其他城市相比，香港的塑料回收率偏低。這可以歸究於幾個原因，包括缺乏便利和足夠的回收設施以及對塑料回收的財政激勵不足。對於膠樽，回收主要由私營公司和消費者推動。政府在這個問題的回應上缺乏積極性。我們歡迎環境保護署從去年開始推出的逆向自動售貨機先導計劃。然而，市場上的逆向自動售貨機數量有限，地理覆蓋範圍不足。此外，回收的經濟激勵措施也沒有吸引力，根據 Green Queen 的報導，香港政府的膠樽回收價（每個0.1 港元）是世界上最低的。