What is ESG?

ESG is an abbreviation for Environmental, Social, and Governance, representing the responsibilities that companies must undertake for environmental protection, social welfare, and internal governance while pursuing profits. ESG was first used in the 2004 report "Who Cares Wins" [1], to encourage different stakeholders to incorporate ESG into their investment decision standards to promote more stable and predictable market development, contributing to a better investment market and the sustainable development of the planet. Until now, ESG has become one of the criteria for investors and consumers to select brands, making it a critical focus that companies must pay attention to.

Environmental:
This focuses on the company's impact on the natural environment, including climate change, carbon emissions, energy use, waste management, water resource protection, etc. Companies need to take measures to reduce their negative impact on the environment and actively promote green technologies and sustainable resource use. Different industries are also committed to achieving goals such as "carbon neutrality" and "net-zero emissions." For example, the International Air Transport Association (IATA) has developed a detailed "net-zero roadmap," covering key areas such as technology research and development, energy infrastructure, policy support, and provides a specific action framework, hoping to achieve net-zero carbon emissions by 2050 [2]. CLP Power Hong Kong plans to phase out coal-fired power plants by 2040 to reduce greenhouse gas emissions and air pollution from operations, aiming for an orderly transition towards a net-zero future while ensuring a stable and reliable energy supply [3]. 

Social:

This involves the company's relationships with employees, customers, suppliers, and the community. It includes labor rights, human rights protection, diversity and inclusion, data privacy protection, and community engagement. Companies need to ensure that their operations have a positive impact on society and respect the rights of all stakeholders. For example, Cathay Pacific actively participates in social welfare activities, supporting the Hong Kong SAR government's "Strive and Rise Programme" by providing guidance and resources to promote youth development. Additionally, it collaborates with non-profit organizations to donate surplus food, donating over 210 tons of food in 2023, demonstrating corporate social responsibility [4]. 

Governance:

This emphasizes transparency and accountability, involving board structure, shareholder rights, and anti-corruption. To enhance the corporate governance level of listed issuers in Hong Kong, the Hong Kong Exchanges and Clearing Limited has issued the "Corporate Governance Code," which sets detailed provisions on board independence and gender diversity, anti-corruption, and whistleblowing policies [5]. 
 

ESG has become the core framework for corporate sustainable development. With the public's attention to ESG, investors no longer only focus on a company's financial performance but also consider its environmental, social, and governance performance to analyze the company's long-term risks and value more comprehensively. If companies can integrate ESG into their business, they can not only enhance their competitiveness and brand image but also bring profound positive impacts to society and the environment. 

Reference: 

[1] World Bank. (2004). Who cares wins. https://documents1.worldbank.org/curated/en/280911488968799581/pdf/113237-WP-WhoCaresWins-2004.pdf 

[2] International Air Transport Association. (n.d.). Fly Net Zero - Decarbonizing aviation. Retrieved October 4, 2023, from https://www.iata.org/en/programs/sustainability/flynetzero/ 

[3] CLP Group. (2023). CLP sustainability report 2023. https://www.clpgroup.com/content/dam/clp-group/channels/sustainability/document/sustainability-report/2023/CLP_Sustainability_Report_2023_tc.pdf.coredownload.pdf 

[4] Cathay Pacific. (2023). Annual report. https://www.cathaypacific.com/content/dam/cx/about-us/investor-relations/interim-annual-reports/en/2023_cx_annual_report_en.pdf 

[5] Hong Kong Exchanges and Clearing Limited. (2021, December 10). [Regulatory announcement]. https://www.hkex.com.hk/News/Regulatory-Announcements/2021/211210news?sc_lang=zh-HK