There has been much talk about ESG - Environmental, Social and Governance. What started as a metric for investors to make ethical investment decisions has now grown to encompass how companies should, and are expected to, behave in general. ESG is now a key issue for company boards and management, and an important consideration for shareholders and investors, individual employees and stakeholders alike. There are rapidly evolving ESG regulations and disclosure requirements with which Hong Kong companies need to comply.

What is ESG?

Traditionally, most companies conduct their business by looking for the highest profit line with the lowest costs. But increasingly, the focus has shifted to ESG issues for which there is growing evidence that actions and decisions that are ESG related drive long-term sustainable value in a business. ESG has now moved beyond just an investment framework. With increased public awareness, society now expects companies to be mindful of their choices and impact on others while conducting their businesses.

So, what is ESG? To put it simply:

• The "E" of ESG stands for "Environmental", and concerns the impact of a company's choices on the environment (e.g., energy consumption, use of finite resources, or creation and disposal of waste).
• The "S" of ESG stands for "Social", which encompasses how the actions of a company may affect the social well-being of its employees, the wider community in which it operates, and society at large. This strand has been...

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