The importance of clear ESG messaging in Asia
The global trend towards sustainability makes communicating green values increasingly important for companies.
Governments are providing support for green finance development and are beginning to scrutinise the private sector for ESG compliance more closely.
As the green financing toolkit expands, investors are increasingly attracted to sustainable projects.
Companies across the globe are becoming increasingly aware of the importance of sustainability and are now including it as a criterion in their project planning.
The shift in capital markets towards sustainability is well illustrated by the evolution of the UN-backed Principles for Responsible Investment (PRI). In 2006, the PRI had 63 investment companies as signatories, with USD6.5 trillion in assets under management (AUM). By 2018, the number of signatories had grown to 1,715 and AUM had grown to USD81 trillion.
This trend shows that shareholders are taking action on their concerns about sustainability and that companies need to clearly communicate to them their Environmental, Social and Governance (ESG) values.
Companies building their ESG messaging should take into account several key considerations as they shape their strategies:
Public and private scrutiny of ESG in Asia is on the rise. Governments are actively developing green finance markets while getting tougher on ESG requirements by creating new guidelines to which companies must pay attention. For example, Hong Kong’s government is supporting the Hong Kong Quality Assurance Agency in developing a Green Finance Certification Scheme that will provide third-party assessments of green projects. On the private sector side, Hong Kong Stock Exchange has changed its ESG reporting requirements for listed companies to require mandatory disclosure.
There is a need to clearly define a company’s ESG achievements; all public messaging should be comprehensive and crafted with regard to social issues raised by investors and the media. Mainland Chinese companies provide an example of investors who are becoming more aware of ESG investing, driven in part by the inclusion of the China A-share market into global indices and in part by government regulations. By sending out a clear message about what they are doing and considering doing in future, companies can shape public discourse before outside voices do so.
The expanding number of green financing options represents an opportunity for companies, with sustainability-linked loans (SSLs) providing a good example. An SSL features interest that is paid by the borrower and linked to selected sustainability key performance indicators (KPIs), such as carbon emissions. This means companies that take out the loan and meet their sustainability targets can enjoy lower interest rates. The range of companies that can benefit from SSLs is diverse. Utilities firms, housing providers and even education companies can benefit by tying their loan to different KPIs, such as the number of people trained through green education programmes. Taking out an SSL is also a solid indicator to investors of a company’s ESG efforts.
These considerations reflect the growing accountability of companies in Asia for their ESG disclosure. For communications professionals, developing clear and concise ESG messaging will be an increasingly vital task in helping their organisations make the most of the opportunities in sustainable financing available in Asia.