Environment, social and governance (ESG) issues are moving centre-stage for companies as investors begin to take these factors into account before allocating capital.
A consensus has emerged among business leaders worldwide that companies ignore ESG at their peril. This issue was brought into sharp focus at last month’s 15th Asian Financial Forum (AFF) – a highlight event celebrating the 25th anniversary of the Hong Kong Special Administrative Region (HKSAR) that was organised by the HKSAR Government and the Hong Kong Trade Development Council (HKTDC). Themed “Navigating the Next Normal towards a Sustainable Future”, the online-only AFF 2022 featured real-time polls to gauge the views of participants on topics including the global economic outlook, ESG and green investment trends.
Neglecting ESG costly
PwC and the HKTDC jointly presented a pulse survey, “ESG Investing: Challenges and Opportunities for Hong Kong", during AFF 2022. Speaking at the forum, Elton Yeung, Vice Chairman of PwC China, said the survey indicated that more than half of the survey respondents believed that neglecting ESG factors could affect organisations’ ability to attract business opportunities and retain clients. Nearly 40% said it could affect their organisation’s reputation and the sustainability of their operations in the long run.
The report also pointed out that the involvement of boards and executive directors in ESG matters is effective in encouraging companies to move towards sustainability. The green bond market and unified carbon emissions trading market in the Guangdong-Hong Kong-Macao Greater Bay Area provide significant opportunities for the development of ESG investing in Hong Kong. However, respondents said they saw the lack of a homogenous framework or standardised guidelines for measuring ESG factors as a challenge to implementing ESG practices and measures, corresponding with the result of a real-time online poll taken during the forum.
Other online polls at AFF 2022 found 43% of respondents were optimistic about the outlook for the global economy in 2022 – significantly up on the 32% in the previous year’s poll – while 33% of respondents had a neutral view and 24% expressed pessimism.
When asked about the most significant barrier preventing their companies from implementing more ESG-friendly policies, 33% pointed to the lack of unified, easily understandable ESG standards and 22% cited the difficulty in balancing ESG practices and business goals. Of the respondents, 45% identified green energy as the sector with the greatest potential in Asia, followed by real estate and construction (16%), transport infrastructure (14%) and agriculture and food (14%).
Delivering his remarks on the second morning of AFF 2022, Paul Chan, Financial Secretary of the HKSAR, noted the tremendous opportunities for Hong Kong’s financial market created by Mainland China’s continued development. “The national 14th Five-Year Plan sets out the long-range objectives of the country through the year 2035, and strategically affirms the role and positioning of Hong Kong in the overall development of our country, presenting opportunities in various areas of importance,” Mr Chan said, adding that the plan underlined Hong Kong’s continuing importance as an international financial centre.
Heavyweight speaker line-up
AFF 2022 featured several keynote speeches, including an address by Mark Carney, United Nations Special Envoy on Climate Action and Finance. Mr Carney shared his insights on how to build a sustainable financial system as a way of mitigating the liability and transitional threats posed by climate change.
Another distinguished keynote speaker was Jean-Claude Trichet, Former President of the European Central Bank. He noted that the financial industry, regulators and policymakers should step up their concerted efforts when it comes to addressing key issues related to monetary stability in times of uncertainty.
Looking at the financial world from a different angle, Michael Milken, Chairman of the Milken Institute, shared on the positive changes that his philanthropic work has created for communities. “There is no substitute for continued investments in education. One of the things we learnt from COVID is that we need to provide knowledge and education, as it relates to the environment, to nutrition, and to the promise of science. Just developing new technologies and new techniques that are effective, COVID has shown us it’s not enough. We have to make sure that it is communicated so the billions of people on the planet can fully understand and have access to these technologies.”
Tian Guoli, Chairman, Executive Director, China Construction Bank, said: “In 2022, Asia will likely become a force to boost the development of sustainable development in a world full of uncertainties. Hong Kong will certainly play a more crucial role as an international financial centre.”
Ju Weimin, Vice Chairman, President & CIO, China Investment Corporation, a sovereign wealth fund, offered his analysis of the current macro investment trends in Asia and China, noting that sovereign wealth funds are a key source of global investment capital. “They have been the key players in developing the global financial market; they have grown rapidly and are making a bigger impact on the international market and capital flow. Especially since the global financial crisis, the total size of the sovereign wealth funds worldwide has doubled and is approaching the global size of alternative investment,” Mr Ju said.
Equity through crypto
Addressing the outlook for cryptocurrencies and blockchain, Sam Bankman-Fried, Founder and CEO of cryptocurrency exchange FTX.com, said: “One of the big goals of crypto is to be able to build an ecosystem where there is financial inclusiveness, where anyone can get equitable access to the financial markets. When you look at traditional markets, you just don’t see that ease of access. For some reason in crypto, the exchanges seem to play a very central role, whereas in the rest of the financial ecosystem they played a relevant role but a less central one. That is one big thing that really changes people’s minds on ecosystems as they walk through it.”
Bestselling author and Founder and Executive Chairman of Moven Brett King, also widely known as the “Godfather of Fintech”, offered his perspectives on how the emergence of innovative fintech solutions presents both an opportunity and a challenge to the banking and financial industries.
Strong Deal Flow demand
The three-day AFF Deal Flow Matchmaking Session generated more than 700 one-on-one matchmaking meetings between investors and project owners.
In response to high investment demand, this year’s AFF Deal Flow Matchmaking Session, co-organised by the HKTDC and the Hong Kong Venture Capital and Private Equity Association, ran added an extra day, running from 10 to 12 January. The AFF Deal Flow facilitated collaboration between project owners, potential business partners and investors by arranging more than 740 one-on-one meetings and connecting capital with investment projects from around the world. Over 720 projects in the AFF Deal Flow Matchmaking Session covered a wide spectrum of sectors, including fintech, healthtech, deep tech, consumer goods, infrastructure and real estate, environment, energy and environmental technology. More than 230 of the projects were ESG-integrated to meet the related needs of investors.
The Deal Flow sessions drew more than 1,000 investors and project owners. The broader forum attracted more than 63,000 viewers and featured more than 170 global speakers and over 130 exhibitors.
Video playback of all the sessions and virtual exhibitions from AFF 2022 will be available on the event’s online platform until 11 March 2022. Participants can enjoy round-the-clock access to 60 keynote speeches and panel discussions as well the exhibitions of more than 130 local and international financial institutions, tech companies, start-ups and investment agencies, showcasing a plethora of advanced financial technologies and unmissable investment opportunities.