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HKICPA Awards find improving ESG but companies need to do more to integrate their corporate governance and ESG

06 December 2021

(HONG KONG, 6 December 2021) To become more sustainable and resilient in the long term, Hong Kong listed companies and public sector organizations will need to further integrate their corporate governance (CG) and ESG (environmental, social and governance) policies and practices into their strategy and operations, according to the judges of the Hong Kong Institute of Certified Public Accountants (HKICPA)’s flagship Best Corporate Governance & ESG Awards (Awards).


Most Sustainable Companies/ Organizations Awards

 

“We were pleased to see more interest than ever in the revamped Awards this year, with high numbers of annual and ESG reports reviewed and more companies making it onto the short list, particularly in the ESG section of the Awards”, said Mr. Raymond Cheng, HKICPA president and chairman of the judging panel.

 

With a growing awareness around the world of the importance of integrating CG and ESG, the Institute introduced a new, top category of awards, namely the Most Sustainable Companies/ Organizations Awards (MSCO Awards). They reflect “sustainability” in its broadest sense, not merely focusing on ESG. They recognize listed companies and public sector organizations that have performed to an equally high standard in both CG and ESG and that are taking steps to integrate these two key aspects of their performance. “For companies to achieve long-term success and be able to face the economic, environmental and social challenges ahead, the board needs to have effective oversight of governance and ESG matters, and the company needs to incorporate ESG considerations into its vision and operations, including its strategies, investments, risk management and stakeholder engagement”, said Mr Cheng.

 

Ms. Loren Tang, chair of the 2021 Awards Organizing Committee, explained, “We are pleased to see that the judges were able to identify as number of winners of the new MSCO awards. Most of these are familiar names that have been continuing to strengthen their CG and ESG practices and disclosures. However, the judges decided not to give out any diamond awards as they believe that, at this stage, in Hong Kong, there are still areas where more needs be done. This includes, for example, speeding up the process of board refreshment and establishing quantitative key performance indicators for different ESG initiatives.”

 

The Institute congratulates the 10 awardees in the inaugural MSCO Awards, including CLP, which continued its winning ways, with a platinum award in the Hang Seng Index (HSI) category. HKEX also won an award in HSI category. MSCO awardees in other categories were Prudential, Standard Chartered, The Hong Kong and Shanghai Hotels, Hysan and Lenovo. The Link REIT and Pacific Basin Shipping were given special mentions. The sole MSCO winner in the public sector/ not-for-profit category was the Airport Authority, with a gold award. Other awards were given out in separate sections for CG and ESG. In all, the judges recognized 29 companies and organizations in the 2021 Awards.                       

 

The Awards judges this year found various areas of good practices and disclosures, such as explanations of ESG governance structures and clearer linkages between companies’ vision, strategies and action plans in the ESG sphere. Information on stakeholder engagement and how stakeholder concerns are being addressed is also improving.        

 

Areas for Further Improvement

 

In terms of further improvements, the judges would like to see more evidence that companies are treating CG and ESG as key issues on the board’s agenda, as well as additional information on how companies are setting, monitoring, and periodically reassessing their ESG targets and key performance indicators, and whether and how directors and senior management remuneration is tied to these. The majority of companies do not seem to share their quantitative performance targets to help them track progress towards achieving economic, environmental and social goals. “Climate change is specific concern at the global level, but, for many companies, it is not clear whether they have really analysed the potential physical and transitional risks that they may face from global warming,” Ms. Tang said.

 

At a more procedural level, where companies conduct board evaluations, the Institute would urge them to provide more insightful information about the scope, findings and recommendations. “Many of the disclosures are quite boilerplate. Are directors being asked about the board’s efforts to strengthen  diversity on the board, for example? Ms. Tang asked.                               

 

Although the MSCO winners continue to raise their performance above the ascending bar set by the Listing Rules and legislative requirements, the judges accept that the highest level of the MSCO awards will remain aspirational for the time being, as the path to fully integrating CG and ESG is not straightforward. Furthermore, while ESG standards have been progressing, there has also been some tailing off in terms of overall improvements in CG”, said Mr. Patrick Rozario, chair of the Awards Review Panel.

 

The Institute has made a number of recommendations for further improvements in CG practices. For example,  there is are large number of family controlled businesses in Hong Kong, often with long-serving independent non-executive directors (INEDs), whose independence could be open to question. Appointing a lead INED, to engage more with stakeholders, and report on the work done by INEDs during the year, would give investors and other stakeholders more confidence that the company is taking on board their concerns.

 

“As regards board diversity, in practice, many companies still seem to be paying lip service to the idea,” said Mr. Rozario. Only one in seven directors of Hang Seng Index-constituent companies is female, which leaves Hong Kong lagging well behind other major financial centres. “While gender is only one dimension of diversity, the lack of women on boards clearly needs to be addressed. Diversity on boards encourages better leadership and CG and minimizes the risk of “groupthink”. It can also help increase corporate performance and competitiveness and, ultimately, strengthen resilience,” added Mr. Rozario.

 

Other areas that need to be enhanced include transparency of the processes around the nomination, selection and resignation of directors, as well as disclosure of cross-directorships. More information about the process and findings of internal control reviews would also be welcome.

 

ESG Assurance Research

 

With increasing demand from investors and other stakeholders for more ESG information and data, the question of obtaining assurance on that information is often raised nowadays. Obtaining assurance on ESG information and data from an independent, reputable, service provider can help companies build trust and confidence in their ESG reporting with investors, and improve their competitive advantage.

 

To understand the current situation with ESG assurance Hong Kong, the Institute conducted a brief research covering all the December year-end listed companies for 2020. The Institute found that, among the almost 1900 companies included in the research, only 85 of them obtained external assurance, i.e. only 4.5% in total and, in most cases, it was only a limited scope assurance.

There are believed to be various factors relevant to the low penetration of ESG assurance in the market. One reason is that, currently, there are no generally accepted international ESG reporting standards, unlike for financial reporting.   

 

However, with the announcement at “COP26”, the recent United Nations Climate Change Conference of the Parties in Glasgow, of the formation of a new International Sustainability Standards Boardto develop a comprehensive global baseline of high-quality sustainability disclosure standards, it is likely that there will be greater harmonization and comparability of ESG-related standards globally in the future. Investors can then have greater trust and confidence in companies’ reported ESG performance, and this will be enhanced by the added comfort that independent assurance can provide.

 

The Institute’s study also found that International Standard on Assurance Engagements (“ISAE”) 3000 issued by the International Auditing and Assurance Standards Board, or the Hong Kong equivalent, namely HKSAE 3000 (Revised) Assurance Engagements Other than Audits or Reviews of Historical Financial Information, issued by the HKICPA was by far the most commonly adopted standard used for assurance reports.

 

“Accountants definitely have the skill sets and understanding of key processes, such as financial and data analysis and internal control and risk management, to take a leading role in ESG assurance, as well as reporting, said Mr. Cheng. “Members of the profession are trained to apply professional standards and are bound by a code of professional ethics,” which makes them ideal providers of assurance services”, he added. Furthermore, the Institute has published a Technical Bulletin (AATB) 5 Environmental, Social and Governance (ESG) Assurance Reporting, to assist practitioners in performing ESG assurance engagements, in accordance with HKSAE 3000.

 

The Awards is supported by media sponsors Hong Kong Economic Times, The Standard and ET Net. For more details, please visit: https://www.hkicpa.org.hk/en/Thought-leadership/Corporate-governance-and-sustainability/Best-Corporate-Governance-and-ESG-Awards

 

List of Awardees

Judges' Report

 

 

 

 

香港會計師公會認為本港企業的環境、社會及管治 (ESG) 表現有所提升ESG

但企業仍需加強融合企業管治和ESG兩者的表現ESG

 (香港,2021年12月6日)香港會計師公會的年度「最佳企業管治及ESG大獎」評委表示,長遠而言,香港上市公司及公營機構需要加強重視可持續發展及履行社會責任等議題,它們必須採取措施將企業管治及環境、社會及管治(ESG)要素融入企業策略及日常營運當中。

最佳可持續發展公司/機構獎

 

公會會長兼評審團主席鄭中正先生表示:「大會今年重新命名及修訂項,以鼓勵公司及機構融合管理及實踐企業管治與ESG事務。我們很高興看到大家比以往更加關注修訂後的大獎。今年提交予評審的年報及ESG報告數量十分多,而且入圍ESG獎的公司數目更創歷年新高。」

 

隨著全球越趨關注融合企業管治及ESG的重要性,公會設立一個新獎項,作為獎項當中的最高榮譽—「最佳可持續發展公司/機構獎」。此獎項的設立旨在鼓公司機構不關注 ESG,而是從各個層面上均反映「可持續性」。大會希獎項表揚各公司及公營機構在企業管治和ESG方面均達到高標準級別。鄭先生說:「公司若要取得長遠的成功,並且能夠面對未來的經濟、環境和社會挑戰,董事會必須有效監督企業管治及ESG表現,同時公司需將ESG因素融入其願景和營運,包括其策略、投資、風險管理及持份者參與。」

 

大獎籌委會主席鄧苑儀女士表示:「我們很高興有數機構獲得新設的『最佳可持續發展公司/機構獎』,大部分是熟悉的名字,證明他們不斷善自的企業管治及ESG實務披露。然而,屬最優異水平的『鑽石獎』仍然懸空。評審團認為現階段香港的公司及機構在若干領域仍有進善的空間,例如促進董事會成員交替,以及為不同的ESG範疇訂立關鍵績效指標。」

 

公會謹此恭賀「最佳可持續發展公司/機構獎」的10位得獎者,包括再度獲得恒生指數成份股組別最高級別的白金獎得主中電控股有限公司,及獲得恒指成份股組別金獎得主香港交易及結算所有限公司。「最佳可持續發展公司/機構獎」其他類別的得獎者包括:英國保誠有限公司、渣打集團有限公司、香港上海大酒店有限公司、希慎興業有限公司及聯想集團有限公司。而領展房地產投資信託基金及太平洋航運集團有限公司均獲評判嘉許。於公營/非牟利機構類別中獲得金獎的機場管理局,是該類別的唯一得獎者。今年亦頒發了企業管治及ESG的個別獎項。整體而言,本屆大會共頒發29個獎項。

 

今屆的評審認為,入圍企業安排及披露值得表揚,例如部分企業能夠清晰地解釋ESG管治結構以及ESG願景、策略和行動計劃之間的聯繫。評審亦認為,企業的持份者參與及處理市場議題的相關披露亦有所改進。

有待進一步改善之處

 

評審,未來希望看到更多公司將企業管治和ESG視為董事會議程上的重要議題,以及披露更多關於企業如何設定、監察及定期重新評估其ESG目標和關鍵績效指標的資訊,及董事和高級管理人員薪酬會否與上述要素掛鈎。大部分企業目前似乎未有分享他們的量化績效指標,令公眾難以追蹤ESG目標落實的進度。鄧女士說:「氣候變化是全球關注的議題,但不少企業仍未透徹地分析氣候變化為其帶來的風險。」

 

企業進行董事會評估的程序上,公會期望企業會就評估範圍、調查結果建議等層面,提供更有用的資訊。鄧女士示:「企業目前許多披露都是相當表面,並未有著墨一些較深入的問題,如董事會內有否鼓勵各位董事表達不同的觀點

 

大獎遴選委員會主席羅柏達先生儘管各家得獎機構正不斷提升表現,其表更遠高於上市規則和立法規定日趨提升的標準,不過將企業管治和ESG兩者完全融合並不容易,企業要達到獎項中最高榮譽 —「最佳可持續發展公司/機構獎」則仍需努力。此外,雖然市場上ESG準則越趨完善,惟不少企業在改善企業管治方面的步伐卻減慢。

 

公會已就企業管治實務議題提出多項建議,以香港家族企業為例,此類企業的獨立非執行董事的任期通常十分長,以致其董事會的獨立性受影響。因此,企業委任首席獨立非執行董事,以負責與持份者溝通及匯報獨立非執行董事在年內的工作,均可令投資者及其他持份者對公司企業管治更有信心。

 

羅先生,目前為止許多企業仍未就董事會成員多元化作出任何實際行動恒生指數成份股公司之中,只有七分之一的董事女性,香港的女性董事會成員人數遠遠少於其他主要際金融中心。羅先生認為:「雖然性別只是成員多元化的其中一個範疇,顯然需要更多企業著手解決董事會女性成員不足的問題。董事會成員多元化是為減低『集體思維』所帶來的風險,以提升董事會領導能力和企業管治,更可提高企業績效競爭力,公司發展更穩健。」

 

另外,企業其他需要範疇包括董事提名、篩選和辭職等程序的透明度,以及董事互擔任對方公司董事職務的披露。若企業能提供更多有關內部監控檢討的程序及結果,將對企業發展十分有利。

 

ESG鋻證調查

 

隨著投資者及其他持份者對ESG資訊及數據的需求日益增加,現時相關鑒證問題亦常受關注。經由信譽及專業的機構來鑒證公司的ESG 資訊及數據,可令公司披露的可持續發展資訊更公信力,亦令持份者更信任公司所披露資訊準確完整

 

為了解香港目前的ESG鑒證狀況,公會對所有在2020年以12月為結算日的上市公司進行了一項簡單調查。公會發現,在調查近1,900家公司之中,只有85家公司取得外部鑒證,即僅佔總數的4.5%,而大多數公司更只取得有限鑒證。

 

ESG鑒證的市場滲透率偏低,相信與多因素有關,其中一個原因是國際ESG報告準則有別於財務報告,目前沒有任何公認標準。

 

然而,隨著國際財務報告準則基金會最近在格拉斯哥舉行的第26屆聯合國氣候變化大會(COP26)上,宣布成立國際可持續發展準則理事會,以制訂全面及全球優質可持續發展披露準則基準,未來全球ESG相關準則將會更趨統一和具有可比性,再加上企業進行獨立鑒證,公司所匯報的ESG表現將會更具公信力。

 

公會調查亦發現國際審計與鑑證標準委員會頒布的《國際鑑證業務標3000》(ISAE3000(或在香港相等於由香港會計師公會發布的《香港鍳證業務準則》第3000號(HKSAE 3000)(經修訂)「非審核或審閱過往財務資料之鑒證工作」)是迄今為止最常用的鑒證報告準則。

 

鄭先生表示:「會計師絕對具備ESG鑒證和匯報方面的技能,並了解財務和數據分析,及內部控制和風險管理等公司關鍵營運流程,我相信這些技能都能令會計專業在ESG 鑒證及滙報中發揮重要的主導作用。」他補充:「業內人士在應用專業準則方面訓練有素,因此他們是提供鑒證服務的理想人選。」此外,公會已發佈技術公報第5號:環境、社會及管治鑒證報告,以協助從業員根據HKSAE 3000執行ESG鑒證工作。

 

大獎的傳媒贊助機構包括香港經濟日報、英文虎報及經濟通。有關大獎的詳情,請瀏覽:https://www.hkicpa.org.hk/en/Thought-leadership/Corporate-governance-and-sustainability/Best-Corporate-Governance-and-ESG-Awards

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