Hong Kong companies are increasing their emphasis on environmental, social and governance ( ESG ) matters and have made significant strides in ESG oversight, integration, financial impact assessment and ESG-linked remuneration, according to a recent survey.

Notably, 79% of companies in Hong Kong have established dedicated sustainability committees for ESG oversight, finds the Sustainability Governance – The Four Signposts survey by EY Greater China Region ( EY ) and the Hong Kong Chartered Governance Institute.

This development highlights that company boards and senior management in Hong Kong are now devoting more attention to ESG matters, which is a critical step in elevating ESG issues to the boardroom, enabling guidance and support from the top to address stakeholder expectations, regulatory demands and investor scrutiny.

Interestingly, 61% of companies have incorporated sustainability-related risks into their enterprise risk management, demonstrating that these risks are starting to be managed through more robust mechanisms, alongside other key risks.

However, only 17% have included sustainability-related opportunities in their risk assessments and business strategies. This finding indicates that while companies are increasingly focused on identifying ESG-related risks, there is significant potential for growth in recognizing opportunities that can enhance competitive advantages, strengthen reputation and facilitate the transition to a low-carbon economy.

In terms of financial assessment, 69% of companies report identifying financial areas affected by ESG or climate-related risks qualitatively. However, only 12% have reached the lengths of assessing the impact quantitatively.

Quantifying the financial impacts of sustainability risks, the study adds, is essential for enabling a higher level of integration into decision-making and allowing boards to more effectively communicate the companies’ resilience and prospects to stakeholders.

The incorporation of ESG factors into executive remuneration remains limited, the survey finds, with only 38% of companies including ESG elements in the remuneration scheme for senior management. To enable market-wide alignment of sustainability objectives and companies’ strategic directions, a greater degree of alignment may be needed, such as in terms of scope, weight and role coverage.

“The rise of sustainability committees within corporate boards marks a transformative moment in corporate governance in Hong Kong,” says Jasmine Lee, EY Hong Kong and Macau managing partner. “This trend reflects a proactive commitment to ESG principles, positioning companies to not only mitigate risks but also harness innovative opportunities for growth.

“By integrating sustainability into core strategies and aligning executive compensation with specific objectives, businesses can lead the way in driving positive change and securing a competitive advantage in a dynamic market landscape. This forward-thinking approach enhances reputation and sets the stage for long-term success and resilience.”