11th January 2023 – Raymund Chao, PwC Asia Pacific and China Chairman, presented the findings of a joint pulse survey with the Hong Kong Trade Development Council (HKTDC) at the Asia Financial Forum today. The survey focused on how companies in Hong Kong are financing the corporate transition to a sustainable future.

Raymund Chao, PwC Asia Pacific and China Chairman, said, “It was a great opportunity for us to partner with the HKTDC to release our joint research today at the Asian Financial Forum. Our survey, which centered around ESG transformation, pointed to a number of challenges and opportunities facing local corporations in delivering meaningful results on their ESG journey and effectively financing their ESG initiatives. It is clear that businesses can no longer afford to ignore the ESG implication of their practices, nor can they afford to stagnate on ESG efforts given society’s expectations. Businesses need to embrace a gamechanger mindset, while working together with all levels of stakeholders to build trust and drive sustained outcomes in this space. As policymakers bring additional focus to ESG, along with higher C-suite awareness, we believe this will not only further Hong Kong’s development in green finance, but will also propel the world forward towards a sustainable future.”

Insights in a snapshot

• ESG remains high up on the corporate agenda as Hong Kong companies are charging forward with carbon-neutral or net-zero commitments. However, the majority still lack a scientific or measurable execution approach as only 15% of these commitments are science-based. 30% said they have climate change commitments that aren’t aligned with a science-based target, while 21% are already working towards making such commitments, whether scientific or not.
• Respondents are taking action to drive ESG transformation, with the majority (57%) adopting alternative energy sources to reduce their carbon footprint. 48% are readjusting their supply chains.
• Among the many benefits of ESG transformation, 60% believe it can strengthen their competitive advantage in the longer term. 57% expect to see an improvement in brand awareness and reputation. Other viable options to drive ESG transformation include upskilling staff with ESG-related training and development programmes, deploying automation technologies, exploring remote or virtual work models, as well as hiring external consultants to advise on ESG matters.
• Lack of expertise (55%), policy incentives (48%) and funding (46%) are major hurdles in the path to ESG transition. Other challenges include less than convincing evidence of market demand and financial return, and insufficient funding dedicated to such purpose.
• Planned ESG investment increased to a lower degree when compared to the year prior (2023:76%; 2022:89%) as companies become cautious about their corporate spending in light of economic headwinds.
• Fewer companies are looking to fund their ESG projects through bank loans, green bond issuance and other sustainability-linked instruments. Instead, the majority (77%) said funding will mostly come from their internal cash flow.
• Issuing green bonds and sustainability-linked instruments aren’t as popular for funding ESG initiatives as the immature market infrastructure (48%) and higher financing costs (42%) act as the biggest obstacles.
• In term of opportunities for Hong Kong as a regional green finance hub, 43% of respondents cited developing common taxonomy for ESG reporting and disclosure as offering the most leverage for the development of green finance, followed by growth of ESG and sustainability funds (42%), and green bonds (41%)
• Hong Kong is the most competitive region in terms of the maturity of its financial market, its presence in the international market, local enthusiasm for ESG, as well as ESG disclosure framework and implementation. These attributes combine to help the city address the growing demand for ESG financing and green finance solutions.
• According to 63% of respondents, the need of the hour is for the Hong Kong government to update tax policies and subsidy schemes to encourage the adoption of more green finance products including green bond and carbon credits or offsets. Equally important are the suggestions for the city to raise awareness about ESG risks in the financial services industry, and to collaborate with cities in the GBA and the wider international society for ESG data sharing.