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THEME STORY: ESG: The Opportunities to Create Sustainable Future

ESG: The Opportunities to Create Sustainable Future

Over the past decades, environmental protection has become a public concern. Numerous notions and keywords, such as sustainability, climate change and green economy, have been popularized. In particular, the relationship between environmental protection and economic development has been significantly pondered. In 2004, the UN Global Compact put forward the notion of "ESG" for the very first time. The term refers to three key concepts, namely, Environment, Social and Governance. Considered as an index for business assessment in the new era, the notion focuses on the win-win relationship between environmental protection and economic development, as well as the social responsibility of an enterprise.

The Investors' Turn to ESG

According to the UN Global Compact, environmental issues are the global challenges posed to every company across the world. Every company is expected to take the responsibility to incorporate the principle of sustainability into their business framework. Enterprises are urged to improve their management of natural resources and to adopt innovations and solutions to cope with environmental challenges like the shortage of energy, air pollution and polluted water. Apart from the environmental concern, ESG also highlights the parallel development of business and society, in other words, social sustainability. Issues relevant to human rights of specific groups, such as labor rights, workplace gender equality, workplace disability management and the problem of child labor, are some of the examples and factors that a company should take into account when it comes to business planning, development and management. Last but not least, ESG's emphasis on "governance" suggests that a company should uphold values such as transparency, accountability and inclusiveness so as to adhere to the international norms and standards.

In the wake of increasing awareness of environmental protection and human rights, ESG has become one of the key factors for many investors to assess and evaluate an enterprise. In 2018, Larry Fink, founder and CEO of the American investment company BlackRock, called for the S&P 500 companies to perform social responsibility, stating that "to prosper over time, every company must not only deliver financial performance, but also show how it makes a positive contribution to society." Four years later, Fink in his open letter added, "every company and every industry will be transformed by the transition to a net-zero world. The question is, will you lead, or will you be led?"

Investors' alignment with the values of ESG is not just a slogan but a practice. Led by a sheer volume of investors, Climate Action 100+ is a global initiative that has prompted the collaboration between the world's largest corporate greenhouse gas emitters to take necessary action against environmental challenges. The initiative is assisted by the Principles for Responsible Investment (PRI), and various international investor networks including the Asia Investor Group on Climate Change (AIGCC), the Investor Group on Climate Change (IGCC), the Institutional Investor Group on Climate Change (IIGCC) and Ceres. To date, the initiative has managed a total of 68 trillion US dollars and engaged 166 global companies, demonstrating the investors and enterprises' mutual efforts to tackle the global environmental challenges as well as the opportunities behind ESG.

Creating Sustainable Future with Government Support

When it comes to the propagation of ESG, government support and policy also play an integral role. In line with the notion of ESG, recent policy addresses and budgets have envisioned the future of Hong Kong using keywords like "Green Finance" and "GreenTech". In order to support innovation and technology (I&T) and financial projects that focus on the reduction of carbon footprint, the government has launched various funding schemes and programmes such as Green Tech Fund, Green and Sustainable Finance Grant Scheme, and Government Green Bond Programme. Earlier this year, the government issued the US$5.75 billion equivalent of government green bonds, which have been regarded as the largest ESG bond issuance in Asia. In February, the Hong Kong government issued the first-ever tokenized green bond, as the first government in the world to do so.

As the 2023-24 Budget puts, "bringing together resources such as technological innovation, finance, commerce and manpower, this economic model can drive economic transformation and sustainable development, generate demand and create strong impetus for growth. The whole industry cluster is growing rapidly, but the formation of a leading green technology and finance cluster has yet to be seen around the world." In this context, local enterprises should be proactive, grasp the opportunities, and become the "leader" as Fink suggested, with a view to creating a sustainable future.

ISL's product ReportNOW is an all-rounded digital solutions platform which provides enterprises a tool to produce various kinds of customized e-reports and e-forms. As a result, it helps reduce the waste of paper, eventually leading to the digitalization of workflow and process. On the other hand, r-Tag, a built-in tool that capitalizes on the technology of "Internet of Things" (IoT) for ReportNOW, facilitates the transmission of real-time information via online means such that enterprises can catch up with the latest status and solid data of environment management. With these digital transformation solutions, ESG goal becomes achievable for every enterprise.