SAR-listed companies are slow to improve ESG reporting practices, according the latest report by consultancy firm EY.
The consultant analysed ESG reports from 1,200 Hong Kong-listed companies and found that a ‘box-ticking’ approach is the main method of reporting information related to ESG.
Around 68% of listed companies use the perfunctory approach, which involves reporting information with low or even no relevance to their business or sector. The situation has improved only slightly from the end of financial year 2016, when 71% of surveyed companies reported information considered too general.
Moreover, only 7% of companies had a clear strategic priority for ESG issues and a plan for execution. Half of all listed companies did not even mention ESG integration in their business strategies, data compiled by EY shows.
The majority (90%) of listed companies did not disclose ESG improvement targets to investors or other stakeholders.
Demand from HK investors
The Schroders Global Investor Study 2018 polled 550 investors in the SAR and found that 82% of them believe the importance of sustainable investing is higher than in five years ago.
Around 60% of those surveyed said they increased allocation to sustainable investments over the past five years and sustainable assets represented an average of 25% in their portfolios.
The preference for investing in sustainable assets increases as investors feel they are becoming more sophisticated. The survey found expert or advanced investors allocate 28% on average to sustainable investments while those who considered themselves a beginner invested only 19%.
More than half of investors surveyed (58%) expected higher profitability from companies employing sustainable practices and 46% responded that sustainability equates to best-in-class companies.
A separate survey from UBS Wealth Management found that 85% of high net worth individuals in Hong Kong say they are interested in sustainable investing, FSA reported earlier.
But actual investment in ESG assets remains low. The bank suggested that fees higher than traditional products may be the reason.
Percentage of companies that avoid ‘box-ticking” approach
|Industry||% of companies|
|Real estates and constructions||49%|
Source: EY. The above table shows top 10 only.
– This article first appeared on ESG Clarity‘s sister site Fund Selector Asia.