88% Of Hong Kong Investors Say That A Company’s Sustainability Efforts Would Affect Their Investment Decision

  • CSR leaders seen to deliver strong business performance – 86% of respondents believe that companies with effective CSR programs can deliver better business performance
  • Increasing awareness after the financial crisis – 40% of respondents pay more attention to the CSR efforts companies undertake now compared to before 2008 financial crisis
  • Women are more influenced than men – 75% more women say their investment decision would be influenced than men

In August, MSLGROUP, SHINEWING Hong Kong and YouGov have jointly announced the findings of a new study on Environmental, Social and Governance (ESG) Reporting which suggests that a company’s ESG compliance status will affect the investment decision of 88% of Hong Kong investors, once the Hong Kong Stock Exchange implements the planned new disclosure requirements, which will require companies to comply or explain.

The study, conducted by YouGov, surveyed 200 investors with more than HK$100,000 to invest in the past 12 months and who are mostly senior management and professionals in Hong Kong on their views on Corporate Social Responsibility (‘CSR’) and the effect of the planned implementation of “comply or explain” reporting obligation which may come into effect in 2015.

This development is part of a global trend driven by regulators imposing mandatory reporting obligations.  93 percent of the world’s largest companies now conduct ESG reporting. However the quality of ESG reporting by companies in China and Hong Kong remains among the lowest globally[1].

The results of the survey also revealed that 42% of the respondents have paid more attention to CSR efforts being undertaken by companies after the 2008 financial crisis, which critics have attributed at least in part to unethical behaviour of corporations.

While investors are paying more attention, the survey suggests that Hong Kong companies have failed to impress investors with their corporate social responsibility efforts.  One-fifth of the respondents felt unable to even select three Hong Kong listed companies that are best in CSR.  The top three performers cited by respondents in terms of CSR among the top twenty listed companies on the Hang Seng Index are HSBC (43%), Hong Kong and China Gas Company (28%) and Sun Hung Kai Properties (22%).

Another interesting finding in the study indicates women are more sensitive to a company’s sustainability efforts than men, with 28% of women saying their investment decision would be influenced by CSR efforts, compared to just 16% of men.

Mr. Roy Lo, Managing Partner of SHINEWING, Hong Kong, commented, “It is clear that company’s sustainability programmes are important to investors.  The interesting thing to note here is that many companies likely have many of these sustainability components in place already, but just do not have the mechanisms to be able to draw the information out and package it up into an effective report.  Companies must develop a proper internal procedure and mechanism that will enable them to account for their performance in the areas of ESG.”

According to the survey, when it comes to specific components of a company’s ESG programmes, investors feel most strongly about operating practices.   This would suggest the focus remains on sustainability programmes that also help improve operational performance.  Indeed, 86% of respondents believe that companies with effective sustainability programmes can deliver better business performance.

Respondents were asked to rank the importance of different CSR programmes, namely Environmental Protection, Operating Practices, Workplace Quality and Community Involvement. 41% of respondents consider Operating Practices as most important, followed by Environmental Protection at 26%.

Mr. James Hawksworth, Corporate & Financial Practice, MSLGROUP in Hong Kong, added, “While the rapidly approaching 2015 implementation date for comply or explain, albeit tentative at the moment, may force some companies into doing more, the results from our study suggest that those companies that embrace and proactively address sustainability reporting will benefit from increased investor support.

“Companies are increasingly beginning to see the value of understanding and reporting their sustainability efforts, not only to meet the growing ESG reporting requirements around the world, but also to meet the expectations of their stakeholders – whether that be investors, employees or even customers.  People are generally more aware of the behaviour of the companies with which they are interacting.”

 

[1] According to a survey of Corporate Responsibility Reporting in 2013 by an international consultancy firm, China and Hong Kong scored among the lowest globally, just 39 out of 100, compared to 54 in the USA, 76 in the UK and 68 in Germany for example.