ReThinking the ‘G’ - and ‘F’ - in ESG

By Mary Devereux, Senior Advisor, SEC Newgate Greater China

ReThink Hong Kong 2022 last week concluded with a rocking final panel discussion featuring Christine Loh, Chief Development Strategist at HKUST and former Under Secretary for the Environment and founder of Civic Exchange. She was joined by representatives of the UK government and a Hong Kong based property conglomerate, along with Tristan Ace, Chief Product Officer at AVPN (more about AVPN later).

The speakers all agreed that Hong Kong has much to be proud of with its Environmental, Social and Governance (ESG) initiatives and programmes, as well as quantifying and working to reduce embodied carbon.

In fact, any fears that ESG is falling off the radar due to Covid and conflict in Ukraine and other geographies, were firmly quashed. If anything, the pandemic and other crises have highlighted the fact that businesses and countries are all deeply connected, all societies are vulnerable, and the environment is under increasing pressure.

Getting to grips with governance

As with almost every event at the conference, the speakers touched on governance as a key factor in driving success. Throughout the two-day event, which attracted more than 3,300 delegates, the spirit of “what gets measured, gets managed,” was all around us. There is a growing awareness of the importance of having KPIs and science-based targets. Consistency remains a priority and standardised definitions are key.

In fact, after this event, I have come to believe that governance is not so much one of the three pillars of ESG but, instead, the foundation upon which they stand. Without governance, ESG cannot be measured.

Where’s the F in ESG?

This led me to consider another key topic of discussion at ReThink, which was “show me the money.” Or to be more accurate, how do we raise funds for ESG initiatives? If we do not have serious financing, none of the brilliant and creative initiatives that were on show last week will ever reach their full potential.

Fortunately, it has become clear to the business and investment world that ESG is becoming non-negotiable. Companies are not only worried about how ESG and non-financial disclosures will impact their investments, they are proactively addressing how to use ESG to generate shareholder value.

There is strong momentum to change the financial services landscape for the better. For insurers, the financial risks of climate change are in the spotlight, as regulators have recently stated firm expectations for climate risk management. Asset and fund managers and asset owners are increasingly being required by regulators and investors to embed sustainable investment into their business.

There are many ways to be an effective ESG investor. It can be through PE or VC investment, through mutual funds, angel investment or simply making considered choices in the stock market.

Asian ESG ecosystems

I was particularly impressed by the work of AVPN (Asian Venture Philanthropy Association), the largest network of Social Investors active in Asia. AVPN creates partnerships between policy makers, family offices, foundations and the private sector to increase the impact and flow of capital into achieving the Sustainable Development Goals in Asia.

AVPN effectively acts as an ecosystem builder, ensuring that resources are effectively deployed. It is proving that financing ESG can be both sustainable for returns and sustainable for the world.

A new model for ESGF

Going forward, I hope we will soon add ‘F’ for Finance to the ESG pillars and no longer see governance as a separate column, but as the rock upon which all efforts stand.

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