In helping organisations achieve what is now the crucial task of balancing social, environmental, and financial interests, accounting professionals have a responsibility not only to a business but also its sustainability agenda. Facilitating a just transition and focusing on environmental, social and governance (ESG) issues are just as essential as achieving the financial objectives.
‘In addition to financial conditions, people and investors nowadays are interested in a company’s developments in other areas such as ESG,’ said Adrian Chong, policy manager for Hong Kong at ACCA, during an insights-sharing session at the recent ACCA Hong Kong annual conference. ‘Many stakeholders want to know if a company has a clear blueprint for its sustainability development.’
First steps
‘Hong Kong’s status is still at a very early stage, and it needs to keep up to attract capital, which could be a challenge,’ said Kelvin Wong, chairman of the Accounting and Financial Reporting Council (AFRC), during his keynote speech at the conference.
While Hong Kong’s ESG progress to date includes defining a mission to achieve carbon neutrality before 2050 and establishing a cross-agency steering group for green and sustainable finance, multiple follow-up actions are needed. These include companies’ readiness for full ISSB climate standards disclosures, nurturing ESG talent in Hong Kong, and improving ESG and sustainability assurance.
Not many companies currently include non-financial metrics data in their financial reporting, but climate change is likely to impact company finances.
‘ESG and sustainability assurance is not yet mandatory in Hong Kong, and the percentage of companies with ESG information assured is below the global average of one-third, as surveyed by the International Federation of Accountants in 2022,’ said Wong. He emphasised that mindset and behavioural change are key to driving change, in addition to knowledge in accounting, finance, economics and value.
Green finance
Investors are increasingly prioritising ESG, with sustainable funds valued at US$2.5 trillion in 2022. It is capital that quality ESG reporting can help companies access. However, Wong pointed out the gap between Hong Kong’s ESG reporting standards and international standards proposed by regulators around the globe.
During a panel discussion, Anthony Cheung, supervisory board member, World Benchmarking Alliance, said: ‘Hong Kong has a solid framework for green financial products.’
However, less than 40 of around 200 ESG funds authorised by Hong Kong’s Securities and Futures Commission invest in green and sustainable bonds, and only a small portion of investments are driving transition locally in Hong Kong. This prompted Cheung to add: ‘Perhaps the regulators could consider providing more specific requirements on fixed-income funds to accelerate the growth of the green and sustainable bond funds.’
Edward Lau, CFO of New World Development, backed mandatory requirements as able to ‘help with the liquidity and therefore foster the “E” aspect’. And Wong acknowledged that larger companies can also play a role in transferring good practices to smaller businesses through training and capacity building.
On the move
Michael Chan, managing director of MTR Lab, said companies were taking proactive steps in fostering ESG. ‘Innovation, technology and social aspects are inextricably linked during the ESG journey,’ he said, explaining that MTR Lab was set up with the aim of creating strategic value for its mother company MTR as well as the citizens through investing in technologies and formulating innovative solutions to co-create a carbon-neutral smart community.
The company is also incubating new ventures to drive carbon reductions, such as the Carbon Wallet App, which promotes a green lifestyle by giving its users points for their green actions like recycling. The points can then be used to redeem rewards from sustainable brands.
Lau shared New World’s belief in ‘shared value’ when it comes to corporate’s social impact in ESG areas. He said: ‘Through spreading Hong Kong’s first large-scale donation match–making platform Share for Good, we empower the connectivity between all walks of life, including corporates, NGOs and individual donors with decentralised power to donate and receive.’ With the joint effort of 120 non-governmental organisations and 200 corporates, the platform has disrupted the philanthropy sector with HK$60m in donations, and 30,000 recipients in relief.
CFOs are not just strategic advisers and risk mitigators, but also change agents
Mindset shift
Cheung emphasised the need for a shift in mindset to recognise the relevance of ESG in the roles of accounting professionals in the short term. Continuous and robust learning should be prioritised for long-term success, he added.
The moderator of the panel discussion, Howard Ling, professor of practice at Hong Kong Baptist University, said: ‘We should effectively leverage today’s learning opportunities. It is important to extract key takeaways and bring them to the board for discussion. Additionally, proactive communication with the CEO and management is crucial.’
Chong highlighted the evolving role of the CFO in driving value, the meaning of which should be discussed among C-suite executives in considering the business’s long- and short-term goals. With their experience in dealing with financial matters, CFOs are well suited to leading these discussions. They serve not only as stewards of assets, strategic advisers, risk mitigators and performance reporters, but also change agents.
‘Companies need a professional accountant to draw a strategy blueprint’
Vital role
Wong pointed out that accountants serving as valued business partners can play an important role in helping businesses achieve their ESG reporting objectives. He said: ‘Companies’ development needs the coordination of resources including capital and talents. Companies’ strategies need a professional accountant to draw a blueprint.’
By using their data experience, accountants can help establish reliable and accurate processes for ESG data. They can also contribute to a business’s materiality assessment, providing context for ESG impacts and aiding stakeholders in decision-making. This gives accountants a vital role in supporting businesses on their path to ESG reporting readiness.
By seizing these opportunities, accountants can maintain their relevance, but doing so requires preparation. Accountants must be ready to embrace and capitalise on their prospects.
More information
Read more AB articles from the ACCA Hong Kong annual conference: ‘Hong Kong’s vibrancy drives recovery’, ‘Hong Kong boosts innovation credentials’ and ‘Hong Kong’s finance hub opportunities’
