Responsible Investor

Hong Kong versus China in the new Asia Pacific sustainability index

As the mainland introduces better environmental reporting, can Hong Kong companies stay ahead?

When it comes to sustainability reporting and environmental, social and governance (ESG) disclosure, how far ahead of their mainland Chinese counterparts are Hong Kong’s companies? The newly established Dow Jones Sustainability Asia/Pacific Index (DJSI Asia/Pacific) offers some clues. The index is based on analysis of corporate economic, environmental and social performance by SAM, a sustainability investment specialist. In the area of environmental performance, it covers general issues like environmental reporting and business strategies in response to climate change, as well as criteria specific to each of 57 industry sectors. The existence of the index sends a clear signal to Asia Pacific companies that they can prepare themselves to tap into a pool of socially responsible investors’ money. While the Index does not list any mainland Chinese companies, it does include three based in Hong Kong and listed on the Hong Kong Stock Exchange. Two of them – the MTR Corporation and the CLP Group – publish sustainability reports and disclose emissions generated by their business operations (for example, air and water pollutants and greenhouse gas levels). In addition, they have both implemented climate strategies

designed to meet emission-reduction targets. CLP is way ahead of its only competitor, Hong Kong Electric, in terms of its levels of disclosure and transparency. Meanwhile, the MTR enjoys a similar status in the public transport sector. However, Hong Kong should not feel complacent about the “backwardness” of mainland companies, nor the “sophistication” of the city’s two showcases. Indeed, the “business-as-usual” attitude of Hong Kong’s regulators is dangerous when one considers that it only has a 3-0 lead over the mainland in terms of the number of companies listed on the new index, and that this could disappear rapidly. For one thing, the Chinese mainland regulators are catching up – both the Shenzhen and Shanghai stock exchanges recently issued their own guidelines to encourage companies to make regular evaluations and disclosures about their environmental performance. These initiatives stemmed from the emphasis that China’s regulators – namely the China Securities and Regulatory Commission (CSRC) and the Ministry of Environmental Protection (MEP) – are placing on environmental performance and compliance requirements. Questions remain for the time being about the availability of data and thus

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