Hong Kong's ESG Expertise: The French Connection

2023-11-20 09:27:40 · Alice Tsang

In a move designed to help strengthen bilateral ties between Hong Kong and France, the Hong Kong Trade Development Council (HKTDC) chose Paris as the first destination outside Asia for its Think Business, Think Hong Kong (TBTHK) campaign, following the end of Covid-19 travel restrictions. HKTDC Research carried out an onsite survey to gauge the views of participating French companies on Hong Kong's roles as an environmental, social and governance (ESG) investment and business solutions provider. A total of 51 valid responses were collected during the one‑day symposium.

ESG is becoming an increasingly important focal point for companies and investors across the globe, creating unprecedented demand for ESG‑related reporting, analysis, investment and solutions. Hong Kong, as an international business hub and financial centre, is an ideal ESG investment and business platform for European and Asian companies.

Most of the French companies that were surveyed agreed with the premise that Hong Kong is an ESG hub with ample ESG investment opportunities, and many said they were interested in the wide range of ESG products and services which Hong Kong excels in delivering.

ESG and sustainability

ESG awareness and practices are becoming increasingly important for French businesses because of France’s international commitments (including those set out in the UN’s Sustainable Development Goals and the legally binding Paris Agreement) and its regulatory legislation (such as the Circular Economy Law and the Climate and Resilience Bill). Over 70% of the French businesses in the survey revealed that they regard ESG development and sustainability practices as “extremely important” or “very important” when it comes to their strategic business planning and investment decisions.

Importance of ESG Development / Sustainability Practices

The French businesses in the survey are keen to adopt ESG initiatives and/or sustainability practices in their strategic business plans and investment decisions. 94% of them said they could see various benefits that ESG strategies would bring to their companies. Almost half (49%) agreed that adopting ESG‑related initiatives would strengthen their companies' competitive advantage in the long run, while 34% said that doing so would enhance their company’s reputation and brand awareness. The idea that adopting such initiatives would help them meet the requirements of regulators and/or external stakeholders was also cited by 34% of the companies in the study.

Perceived Benefits from ESG Initiatives

Challenges faced

As is the case in many other parts of the world, French companies have to overcome a number of challenges when they try to implement ESG measures and sustainable practices. Over half of the respondents in the survey said that lack of knowledge/experience/talents was the key obstacle that they face. A third cited the difficulties involved in quantifying or measuring the impact of ESG/sustainability development and more than a fifth mentioned cost pressures. In order to overcome these hurdles, French businesses tend to tailor distinct strategies to their specific situations. They look at establishing collaboration with other stakeholders, while prioritising clear communication with their investors, clients, employees and other relevant stakeholders.

Key Challenges on ESG Practices and Implementation

Hong Kong-French partnership

Many of the companies involved in the survey indicated that they are planning to increase selling and sourcing ESG solutions through Hong Kong, and are also expecting to forge more partnerships with their Hong Kong counterparts in the future. However, in order to build on the potential for ESG partnership and cooperation between Hong Kong and French companies, plenty more work needs to be done to engage the two sides.

According to the survey's findings, only 9% of the respondents are currently selling ESG solutions to Hong Kong. However, 11% are engaged in selling ESG solutions to other markets through Hong Kong, 14% are sourcing ESG solutions from Hong Kong and 19% are currently partnering with Hong Kong‑based companies over the distribution of ESG solutions.

In terms of future business development potential, 20% of the surveyed companies said that they are planning to sell ESG solutions to Hong Kong, 32% indicated that they would use Hong Kong as a platform to sell ESG solutions to other markets, while 35% are looking to source ESG solutions from Hong Kong. The findings also revealed that nearly half of the companies in the survey (46%) are planning to enter into distribution partnerships with Hong Kong‑based companies in the future.

French Companies ESG Engagement with Hong Kong

Hong Kong as ESG hub

With so many of the French companies in the survey currently working with or planning to partner with Hong Kong companies on ESG, it is clear that Hong Kong is in an excellent position to become an ideal partner over ESG issues. 60.8% of the companies surveyed agreed that Hong Kong is a hub for ESG sourcing, servicing and investment.

Hong Kong as an ESG Hub

When asked about the primary reasons to work with Hong Kong businesses on ESG, 39% of the French companies in the survey cited “ample ESG investment opportunities” as the main driving factor. As an international financial centre, Hong Kong offers a wide range of funds to help French businesses meet their ESG investment and related funding needs. Other important reasons that were singled out in the survey include “government incentives and support” (selected by 33% of the companies) and “the availability and diversity of ESG products” (chosen by 30%).

Key Factors of Working with Hong Kong Businesses on ESG

The responses to the survey highlighted that Hong Kong is well‑positioned to serve as an ESG sourcing and investing platform. 96% of the respondents indicated that they are interested in using or sourcing a wide range of ESG products and services through Hong Kong. 26% said that they are keen to source ESG finished products, while 24% are interested in financial/investment products available in Hong Kong, as well as the city's ESG‑related logistics and warehousing solutions and energy‑management systems and solutions.