By Carly Leung, Co-Founder of Climate Incubator, Hong Kong SAR, China
The inception of Environment, Social, and Governance (ESG) investment began in January 2004 when the former United Secretary-General Kofi Annan wrote to over 50 CEOs of major financial institutions. It has now gone through a massive outward trend, with many companies adopting ESG in their corporate governance principles as consumers adopt a more conscious lifestyle. As companies strive towards implementing and achieving sustainable practices in their day-to-day operations, a question remains - how does ESG benefit the Youth Climate Movement?
What is ESG?
ESG is a framework that is not legally binding, but it is used to assess a company's commitment to sustainability and ethical practices. The Environmental aspect evaluates how a company addresses ecological challenges like climate change and resource conservation. The Social dimension looks at the company’s treatment of people, including diversity, labour practices, and community involvement. Governance focuses on the company’s leadership ethics, including transparency and fair executive pay.
Several key frameworks guide ESG reporting on a company's environmental impact, including Scope 1, 2, and 3 emissions. The Global Reporting Initiative (GRI) offers comprehensive indicators for direct and indirect emissions, providing a detailed view of a company’s environmental footprint. The Sustainability Accounting Standards Board (SASB) provides industry-specific guidelines, focusing on financially material sustainability data such as greenhouse gas emissions, tailored to sector-specific needs.
The Task Force on Climate-related Financial Disclosures (TCFD) emphasizes the financial implications of climate change, encouraging firms to disclose their carbon footprint across all emission scopes to highlight climate-related financial and operational risks. Together, these standards ensure that stakeholders have a clear understanding of a company’s sustainability strategy and its potential financial impacts due to climate change.
Why do many big companies pursue it?
Major corporations progressively acknowledge the significance of integrating ESG principles into their business strategies. This shift is driven by several key factors. First and foremost, there is growing consumer demand for sustainable and ethically produced products and services, which will increase by 24% in 2024, making it imperative for companies to align their practices with ESG criteria to appeal to an environmentally and socially conscious customer base. Secondly, the investment landscape is evolving, with investors now emphasizing ESG factors in their decision-making processes. They recognize the sustainable, long-term returns of committing to companies that are socially and environmentally responsible.
Additionally, regulatory frameworks and government policies worldwide are becoming more stringent, setting higher standards for environmental stewardship and social responsibility. These regulations are compelling companies to adopt and prioritize ESG proactively, not just as a moral imperative, but as a strategic business move to ensure compliance, market relevance, and competitive advantage.
On the other hand, the rise of ESG (Environmental, Social, and Governance) practices in corporate strategies brings with it the threat of companies exploiting them as a tool for greenwashing. Greenwashing occurs when companies engage in deceptive practices, making exaggerated or misleading claims about their environmental efforts to create a false perception of sustainability. For example, companies can divert attention from their true environmental impact by selectively highlighting a single eco-friendly initiative or product while downplaying other aspects of their operations that harm the environment. This undermines the credibility of ESG and hinders genuine progress toward sustainability, as consumers, investors, and regulators may be misled by these superficial claims, ultimately impeding the collective efforts to address pressing environmental challenges.
The link between ESG and youth engagement
The youth climate movement has been at the forefront of advocating for environmental sustainability and demanding action against climate change. ESG provides a powerful tool for youth engagement by aligning the values and concerns of young people with corporate practices. By integrating ESG principles, companies can demonstrate their commitment to addressing environmental and social issues directly impacting young people. This engagement helps foster trust, collaboration, and a sense of shared responsibility between the youth and corporations, creating a platform for dialogue and joint efforts towards a sustainable future.
Green job growth in Hong Kong SAR, China
Hong Kong SAR, China is witnessing the emergence of green jobs and the positive impacts they have on youth. The government of Hong Kong SAR, China has been actively promoting sustainability initiatives, leading to the creation of numerous green job opportunities. For instance, the construction industry has seen a surge in demand for professionals with expertise in green building design and energy-efficient systems. This has provided job prospects for the youth and empowered them to contribute to sustainable urban development.
In addition, Hong Kong SAR, China is actively supporting and nurturing green startups through the implementation of Environmental, Social, and Governance (ESG) initiatives. These initiatives not only attract global investors but also provide a conducive environment for entrepreneurs to develop innovative solutions that combat climate change and promote environmental conservation.
A remarkable example of the support for green startups in Hong Kong SAR, China can be seen through the collaborative efforts of the Hong Kong Monetary Authority (HKMA), the Bank for International Settlements, and the UN Climate Change Global Innovation Hub. Together, they are exploring the utilization of transformative technologies like blockchain and smart contracts to enhance the transparency and traceability of green bonds. This bond leverages blockchain technology to record legal ownership and ensure the credibility and integrity of the green finance market.
The shifting landscape towards sustainable practices and ESG reporting obligations presents substantial opportunities for innovators and entrepreneurs in Hong Kong SAR, China. One notable startup in Hong Kong SAR, China, i2Cool, has gained recognition for its invention of bionic materials inspired by the adaptive features of ants living in the Sahara Desert. These materials have the potential to be applied in building construction, effectively reducing room temperatures by five to six degrees Celsius.
Another startup, Breer is upcycling food by reducing bread waste and utilizing it in the brewing of beer. At present, they have brewed more than 10,000 litres of beer, saved over 6,000 kilograms of bread, and launched four notable beers. By harnessing nature-inspired technologies, this startup demonstrates the ingenuity and commitment of Hong Kong SAR, China's entrepreneurial community, to develop sustainable solutions that combat climate change, mitigate pollution, and promote resource conservation.
Hong Kong SAR, China's support for green startups, coupled with its adoption of ESG practices and emphasis on technology-driven solutions, positions Hong Kong SAR, China as a prominent hub for green tech innovation. Young people, with their strong interest in environmental issues and technological skills, are well-positioned to seize these opportunities and contribute to the transition towards a low-carbon future.
How does ESG benefit the Asia-Pacific region?
The implementation of ESG principles acts as a catalyst for innovation and technological progress. Encouraging sustainability-oriented research and development paves the way for groundbreaking technologies, products, and services designed to meet environmental challenges head-on. This not only generates employment opportunities for the younger generation but also steers the region toward a robust green economy with a market size between $4 trillion - $5 trillion by 2030.
According to the LinkedIn Green Skills report, the report highlights the increasing demand for professionals with green skills. The LinkedIn hiring rate for workers with at least one green skill is 29% higher than the workforce average. Industries such as renewable energy, sustainable construction, waste management, and sustainable agriculture are actively seeking individuals with expertise in these areas. The report highlights the Asia-Pacific region's potential to lead in green skill development, creating opportunities for employment and economic growth while contributing to the region's transition to a more sustainable future.
As the region underwent massive development, emissions ensued, which plagued many cities in the region, impacting the quality of individuals especially young people in the region. By focusing on environmental sustainability and social responsibility, businesses with strong ESG values can ensure their developments and business practices can minimize pollution levels, limit natural resource exploitation, and guarantee worker welfare
What’s next?
ESG serves as a dynamic bridge linking corporate strategies with environmental and social stewardship, offering the youth climate movement an exciting platform for transformative engagement. In Hong Kong SAR, China the burgeoning field of green jobs isn't just a market trend; it's a rallying point for the youth, galvanizing their participation in shaping sustainable business practices. This enthusiasm is mirrored across the Asia-Pacific region, where the integration of ESG principles is not merely enhancing economic metrics but is igniting innovation and knitting the fabric of community well-being more tightly together.
By championing ESG, companies don't just commit to environmental responsibility; they activate a new generation of leaders and problem-solvers. This commitment paves the way for a saga of sustainability that transcends generations, making the corporate world a protagonist in the global narrative of climate resilience and ecological wisdom.