ESG: Not Just a Feel-Good Metric

Green Finance Advisor of Friends of the Earth (HK)

ESG (Environmental, Social, and Governance) factors are becoming increasingly important in investment, purchasing, and employment decisions globally. About 80% of institutional investors and consumers consider ESG, and roughly 70% of employees prefer to work for ESG-minded companies. The ESG mindset’s impact is set to grow, with ESG-influenced assets under management expected to soar 84% to reach $33.9 trillion by 2026. In addition, over $72 trillion is expected to be inherited by younger generations over the next two decades, making it the largest intergenerational wealth transfer in history.

The size of this wealth transfer makes the potential influence of ESG-directed money even more compelling, as younger generations, including Millennials and Gen Z, tend to be more focused on ESG than predecessor generations. They have especially strong views on climate change and are more likely to act on those views.

From a company’s perspective, the label “ESG” is shorthand for the management of the various environmental, social, and governance risks and opportunities they face. Management of such risks has become increasingly crucial due to rising awareness and scrutiny of these matters. In addition, there is robust evidence that good ESG management usually leads to better operational metrics such as ROE, ROA, or stock prices, particularly over the long run. These are strong justifications for companies to invest in sustainability for better corporate financial performance.

Ultimately, ESG is about creating a more sustainable and responsible business model that benefits both the company and its stakeholders. Many companies have already taken steps to integrate ESG considerations into their planning, strategy, and operations, adapting to their stakeholders’ increasingly deeply held worldviews on the responsibilities of business in society.

However, some companies have yet to fully embrace ESG practices, for a variety of reasons. Some companies may drag their feet or balk due to limited resources, but committing to

ESG should be viewed as an investment in the company’s future rather than a mere expense.

Other companies are uncertain about how to implement ESG considerations in a way that aligns with their business goals and values. They can begin implementing ESG by assessing their unique risks, opportunities, and stakeholder expectations, developing a tailored strategy that aligns with their business goals and values, integrating ESG considerations into decision-making, and regularly monitoring and reporting on their performance.

Still, other companies are simply resistant to change or may not fully appreciate the concept of ESG and how it can drive the long-term sustainability of their businesses. Engaging in a practice called “greenwashing,” where companies falsely market themselves, their products, or services as environmentally or socially responsible, is an extreme example of this resistance to change.

Greenwashing undermines investor and consumer confidence and misallocates capital intended to support pro-environmental and social outcomes. Companies that engage in greenwashing may face significant backlash from stakeholders and regulators, as this practice is viewed as deceptive and unethical. Such companies may face legal and financial liabilities, reputational degradation, and weakening of their ESG efforts. Volkswagen’s “Dieselgate” scandal is an extreme example of greenwashing and its consequences. The company had spent millions of dollars advertising cars as environmentally friendly when they were actually spewing up to 40 times the legal limit of pollution. Volkswagen’s reputation took a huge hit, and the company had to pay a total of $34.69 billion to resolve its legal and regulatory problems by March 2020.

ESG-focused companies tend to be well-governed with good controls and processes. This makes them more likely to be aware of the environmental and social risks and opportunities they face and actively address them. By planning and preparing in advance, companies can better mitigate risks, overcome challenges, and seize opportunities, ultimately enhancing their potential for long-term growth and success. These are precisely the qualities that long-term investors seek in companies.

ESG-focused companies are also better able to attract customers, especially those in the younger generations, who are seeking values-based products and services. Establishing a connection with customers that appeals to both their rational and emotional needs can increase brand loyalty and long-term support. They also have a distinct advantage in attracting and retaining talent, particularly among younger workers who are more likely to value and act on social and environmental considerations. Having an engaged and mission-aligned workforce can lead to increased employee satisfaction, reduced turnover, and improved overall performance, all of which are important to a company’s long-term success.

In summary, ESG is gaining importance globally, with a growing number of institutional investors, consumers, and employees considering ESG factors. The younger generations, who are set to inherit trillions of dollars over the next two decades, tend to be particularly focused on ESG. Companies that embrace ESG considerations and manage their environmental, social, and governance risks and opportunities are more likely to achieve better operational metrics, and attract long-term investors, values-driven customers, and mission-driven employees. However, companies that engage in greenwashing and resist the ESG shift risk losing the trust of stakeholders, facing legal and financial liabilities, and weakening their ESG efforts. Therefore, committing to ESG should be viewed as an investment in the company’s future, and companies should tailor their ESG strategies to align with their unique risks, opportunities, and stakeholder expectations.

May 2023 Events on Green Finance/2023年5月綠色金融活動一覽

Check out the above calendar for the fantastic green finance events for May-June 2023! Interested to join and know more about the events? Click the links below for details:


[1] Accelerating Net-zero Action through Carbon Pricing, Digitalisation and Closing the Resource Loop

[2] Real estate investment – Understanding ESG capabilities & disclosures

[3] United Nations Responsible Business and Human Rights Forum, Asia-Pacific: From Commitment to Action

[4] Climate Bonds Connect 2023 – Regional Seminar Asia Pacific

[5] The 2023 Annual Conference of the Green, Social, Sustainability and Sustainability-Linked Bond Principles


【ESG分析師洞見分享】Ryan Fung, CESGA

踏入股東會的季節,不少打著 ESG 旗號的機構投資者也會趁機發揮一下影響力,向一些 ESG 表現強差人意的上市公司投下反對票,雖然 ESG 議題現在政治化,但站在捍衛人類危機角度上,石油企業及其產業鏈似乎仍會被人聲討。

2023 年美國關注的環境(E)和社會(S)問題有增無減,有關設定或加強溫室氣體減排目標、減少塑料污染、性別多樣性、公平和包容性政策,以及供應鏈管理的提案將會增加。

也難怪「減少塑料污染」的倡議正在增加,根據經濟合作與發展組織(OECD)的數據,全球塑料產量在 2000 年至 2019 年間翻了一倍,從 2.34 億噸增至 4.6 億噸。

背後原因第一是源於 4 月中,G7 國家承諾在塑料污染方面制定目標,承諾到 2040 年消除塑料污染。不過「全球生物多樣性框架」公約已於去年底得以落實,當中一些框架如「自然相關財務披露工作組」(TNFD),預料將揭示公司對自然的影響和依賴。

另外歐盟即將出台一些要求企業和基金,進行生物多樣性和生態系統披露的監管,相信會令不少 ESG 基金提早識別相關 ESG 風險,為未來做好部署和應對方式。

塑膠的禍害,不但因為物料難以分解,對環境造成負擔,更甚者是因為約 98% 的塑料產品是用化石燃料生產,有見及此,有些國家和地方就選擇斬腳趾避沙蟲的方式去「搞環保」,略有囫圇吞棗的意味。

香港立法會進行「2023 年產品環保責任(修訂)條例草案」的公聽會,條例「一刀切」要求廢除即棄餐具,全面擁抱由紙、竹、木製成的產品,看似有想法,實質上卻是錯過環保科技的大商機,因為現時已研發出不少「改性」(chemically modified)技術,產品已能夠做到「可堆肥」,較以往的「生物降解」來得更環保,切合循環經濟。


減輕香港氣候風險對吸引人才至關重要:第 2部分 – 電力


正如我們在上一篇文章中所討論的,電力和能源行業是香港溫室氣體排放的兩個主要來源之一。值得注意的是,我們大約 60% 的排放來自電力和能源行業,其中大部分來自電力。減輕香港的氣候風險需要大幅減少我們電力的碳足跡。


在供應方面,必須從替代能源中獲取更多電力。好消息是香港政府正在努力解決這個問題。正如其 2050 年氣候行動計劃所述,香港政府的目標是將可再生能源的份額從目前的不到 1% 提高到中期的 7.5%,到 2035 年進一步提高到 10%,並在長期內提高到 15%。該計劃中的一些替代能源項目包括海上風電場和水庫漂浮太陽能發電系統。儘管雄心勃勃,但這些項目的開發進展相對緩慢。利用可再生能源只是香港政府在2050年前實現碳中和計劃的一部分。考慮到地理限制,香港要100%使用可再生能源極具挑戰性。

根據其 2050 年氣候行動計劃,擴大天然氣發電(配備低碳技術)和核能發電顯然在政府的考慮範圍之內,這些發電量目前合計約佔香港電力的四分之三。這兩種能源選擇通常面臨不同類型的反對,我建議香港政府開始公眾諮詢和社會化他們的計劃。這有助於更多地了解我們的選擇以及不作為的後果。

香港也需要減少對能源的需求,以大幅減少溫室氣體排放。值得注意的是,我們大約 90% 的用電量都用於建築物,而空調在商業能源使用中所佔份額最大 (24%)。 一個有趣的觀察是香港購物中心全年都對空調上癮。 (在香港的商場,我總是需要多穿一件外套。)相比之下,在新加坡、東京和許多其他亞洲城市的商場裡散步要愉快得多。我強烈建議商業地產的業主對他們現有建築的暖通空調(採暖、通風和空氣調節空調)進行改造,並充分利用遮陽、油漆、材料和其他元素,減少空調,使新建築保持涼爽。這不僅有利於地球,還可以節省他們的電費並改善他們的可持續發展形象。


Mitigating Hong Kong Climate Risks is Important to Attract Talent: Part 2 – Electricity

Green Finance Advisor of Friends of the Earth (HK)

As discussed in my previous article, power & energy industries is one of the two primary sources of greenhouse gas emissions in Hong Kong. Noticeably, about 60% of our emissions comes from power and energy industries and majority of that come from electricity. Mitigating the climate risk of Hong Kong requires a significant cut of our electricity’s carbon footprint.

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On the supply side, sourcing more power from alternative energy is a must. The good thing is that the Hong Kong Government is working on this. As mentioned in its Climate Action Plan 2050, the Hong Kong Government targets to increase the share of renewable energy from less than 1% now to 7.5% in the medium term and further to 10% by 2035 and 15% in the longer run. Some of the alternative energy projects in the plan include offshore wind farms and floating solar power systems in reservoirs. Despite the ambition, the development of these projects has been moving relatively slow. Harnessing renewable energy is only part of the Hong Kong government’s plan to achieve carbon neutral before 2050. Considering the geographical limitations, it is very challenging for Hong Kong to use 100% renewable energy.

Expansion of electricity fired by gas (equipped with lower carbon technologies) and nuclear energy, which now generated in aggregate about three quarters of Hong Kong power, is clearly in within the considerations of the government, according to its Climate Action Plan 2050. That said, these two energy options generally face different types of oppositions, I suggest the Hong Kong government to begin public consultation and socializing their plans. This can help understand more about the options we have and the consequence of inaction.

The demand for energy also needs to be reduced in order for Hong Kong to cut its greenhouse gas emissions significantly. Noticeably, about 90% of our electricity use goes to buildings and that air conditioning takes up the largest share (24%) of commercial energy use. One interesting observation is the year-round addiction of Hong Kong shopping malls to air conditioning. (I always need to wear an extra jacket in Hong Kong shopping malls.) Comparatively, it is far more pleasant walking in the shopping malls in Singapore, Tokyo and many other Asian cities. I highly recommend the owners of the commercial properties to retrofit the HVAC (Heating, ventilation, and air conditioning) of their existing buildings and to make the most use of shading, paints, materials and other elements, and less air-conditioners, to make new buildings stay cool. This will benefit not only the planet but also save their power bills and improve their sustainability image.

After air-conditioning, lighting is the second largest energy user, consuming 15% of the electricity of Hong Kong. Our lighting pollution is much worse than many major cities such as London, New York, Tokyo and Shanghai. Commercial segment is again unfriendly to our environment and is a key abuser of lights. The lack of lighting control regulation is arguably a major cause. Showing the support to the Earth Hour by switching off your light an hour a year is far from enough.