Is ESG Part of Your Corporate Strategy or Just “Homework”? – An Interview with Dr Eva Chan, the Founding Chairman of the Hong Kong Investor Relations Association

If a listed company solely focuses on meeting the ESG requirements of the stock exchange and does the bare minimum to meet these standards, how will investor relations professionals view such practices? Dr Eva Chan, Founding Chairman of the Hong Kong Investor Relations Association thinks that such companies are merely “handing in their homework” because they are only meeting the superficial aspects of ESG.

Dr Chan believes that listed companies should incorporate ESG into their corporate strategy and operations. She also shares how Hong Kong-listed companies are communicating their ESG achievements and tips for companies to design a customized net-zero carbon roadmap.

 1.  Many listed companies engage in CSR and are looking to launch ESG communications campaigns. What advice could you offer to these companies?

ESG is the corporate extension of the concept of sustainable development, based on three dimensions of environment (E), social responsibility (S), and corporate governance (G). CSR focuses on social responsibility, so if companies are already engaged in CSR communications, they may wish to focus more on the environmental and governance aspects of ESG.

Every company’s ESG focus varies. For example, a manufacturing company may be more concerned about being environmentally friendly and plans to build factories that will reduce pollution. But a bank may wish to focus on corporate governance, such as funding more green projects as part of its strategy to actively promote sustainable development.

2.  Share with us some examples of companies that have successfully improved their ESG communications.

The Hong Kong Investor Relations Association (HKIRA) organizes an IR Awards ceremony annually, which includes ESG awards. We believe that ESG performance should not only be looked at on an industry level but should be based on a company’s actions and transparency as all companies can strive to become more sustainable.

The 2020 Sustainability Report of the CLP Group (stock ticker: 00002.HK), a provider of power generation, transmission and distribution services, announced that the Group’s carbon intensity has been reduced to 0.57 kg CO2/kWh, hitting its 2020 target of 0.6 kg CO2/kWh set out in CLP’s Climate Vision 2050. CLP’s carbon intensity has been reduced by the commissioning of a new combined-cycle gas turbine unit (CCGT) at Hong Kong’s Lung Kwu Tan Power Station.

United Company RUSAL (stock ticker: 0486.HK) is a mining company with a consistent ESG performance. This company has initiated the move towards greener low-carbon aluminium and carbon neutrality by 2050. In addition, the company is actively fighting COVID-19 by building medical centers in Russia and elsewhere at a cost of approximately four billion rubles or US$56.1 million. It has also earned an A- rating from the Carbon Disclosure Project (CDP) recognizing the company’s efforts in climate change response and environmental management.

3. The companies you mentioned in these examples may have invested heavily in terms of their ESG activities. So, how do companies balance ESG transition and the associated costs?

For companies, their ESG transition usually involves investment and operational alignment. I believe the core challenge for companies is how to integrate ESG into their corporate strategy and operations. This requires management to prioritize achieving long-term growth by operating in a sustainable manner that will attract like-minded investors.

For investors who do not focus on ESG investment, they may consider investing in non-ESG companies which do not incur ESG investment and may have a better short-term return.

READ MORE: ESG Communications Checklist: How Brands Can Avoid Greenwashing in Press Releases

4. Do ESG standards and indicators vary across different stock exchanges? What is your advice to these companies in terms of ESG communications?

I do not think the ESG standards vary much from exchange to exchange. If a company is listed on various stock exchanges that have different ESG standards, it may choose to follow a higher standard in terms of disclosure and communications.

ESG has two different requirements for listed companies: firstly, to incorporate ESG into their operations; and secondly, to comply with ESG requirements of a stock exchange. If a company seeks to excel in ESG, you need to meet both requirements simultaneously and take concrete steps towards building a sustainable operations model. But if you are just seeking to meet compliance rules, you are just “handing in your homework” – something that I strongly advise against.

5. Carbon neutrality is a trending topic that listed companies and investors are paying more attention to. What’s your advice for companies that aim to achieve carbon neutrality goals?

As I’ve described earlier, every company’s ESG focus is different, with an option to focus across three dimensions: environment, social responsibility, and corporate governance. Companies that generate environmental impact with their operations are more likely to focus on carbon neutrality.

As carbon neutrality gains attention worldwide, I advise companies to develop a comprehensive 2050 climate vision that outlines specific plans in different phases to achieve carbon neutrality. When planning their roadmap, companies can analyze the carbon reduction targets and plans proposed by the top performers in their industry and evaluate how to narrow the distance between themselves and these top performers.

Rating agencies, investment management companies, and companies all have their own perspectives and focus areas regarding carbon neutrality and ESG practices. To help IR professionals better understand the perspectives of different stakeholders, HKIRA will host our annual symposium on December 14, in which rating agencies such as MSCI, investment management companies such as Fidelity, and a few listed companies will share ESG case studies and their views.

About the Hong Kong Investor Relations Association

Hong Kong Investor Relations Association (HKIRA) is a professional association comprising investor relations practitioners and corporate officers responsible for communications between management and the investment community. HKIRA advocates the setting of international standards in IR education and promotes the best IR practices. As of 30 June 2021, HKIRA has over 1,000 members.  About 68% of the Hang Seng Index Constituent Stock companies are currently members of HKIRA.

For more trends and best practices on developing an effective ESG communications strategy, download PR Newswire’s ESG Communications Handbook here.

This interview is conducted by Jun Xun Tan, Head of Content at PR Newswire.