Companies must take a top-down approach to instil a mindset change, enlist external help and set up governance systems to mitigate climate risks and tap emerging opportunities, according to top executives at a Hong Kong Institute of Directors conference. As the adverse impacts of climate change assert themselves globally, businesses and regulators need to step up efforts to ensure systems are in place for setting and revising strategies and goals, and for monitoring performance regularly, speakers said during the conference. “Climate change is not just an initiative, it is a cultural change, and it is a very long journey,” Peter Wong Tung-shun, non-executive chairman of The Hongkong and Shanghai Banking Corporation, the main Asia-Pacific subsidiary of HSBC Group, said at the conference, which took place on Wednesday. “The board will be the guardian of this cultural change. We need leadership, we need to have well-established internal guidelines and compliance for consistent practice.” Global greenhouse gas emissions need to be slashed by 45 per cent by 2030 to have any hope of reaching net zero emissions by 2050, so that global warming can be contained at 1.5 degrees Celsius above pre-industrial levels to avert disastrous economic and social consequences, United Nations Secretary-General Antonio Guterres said on Tuesday. HSBC, which has set a goal to achieve net zero carbon emissions by 2030 in its operations and supply chain, has enlisted academics to educate its staff about the predicted economic and social consequences of climate change, Wong said. However, while such risks could devalue assets and hurt businesses, they also bring about opportunities for the bank, which can help finance clients’ investments in technology and equipment to transition towards more sustainable business models, he said. It can also help them offset their carbon footprints through trading of carbon credits, he added. HSBC aims to provide US$750 billion to US$1 trillion to fund clients’ decarbonisation projects by 2030. At the conference, Christopher To, the Hong Kong Institute of Directors’ chairman, announced the launch of a Hong Kong chapter of the Climate Governance Initiative. Spearheaded by the World Economic Forum in 2019, the organisation has 20 local chapters globally, which aim to mobilise company directors to take climate action. Many Hong Kong-listed firms unprepared for coming sustainability standards Also speaking on the panel, May Tan, an independent non-executive director of CLP Holdings, which generates and distributes electricity in Hong Kong and several other Asian markets, said corporate boards must take the lead to drive cultural changes. “The culture has to be cascaded throughout the organisation,” she said. “At CLP, key performance indicators are set to include climate change and sustainability initiatives by employees and departments as part of their goals.” And in case of failure to achieve those goals, “there must be a price to pay”, she added. Beijing ‘must provide more support’ to develop lab-grown protein sector CLP has pledged to achieve net-zero carbon emissions by 2050 and to phase out coal-fired electricity by 2040. Regulators also need to take a carrot-and-stick approach to push companies to take action on climate and sustainability issues, HSBC’s Wong said. “If we just leave it up to the companies, it is not going to work, because some companies would be enthusiastic while others would take a wait-and-see attitude,” he said. “There has to be some disincentive if you are not doing it.” Urban flooding cost in China could jump six-fold to US$477 billion a year Since July 2020, bourse operator Hong Kong Exchanges and Clearing has tightened requirements to make disclosures on climate risks and opportunities and social issues mandatory. Hong Kong regulators are expected to adopt a set of globally agreed sustainability disclosure standards next year, which includes additional disclosures on “material” climate-related information essential to decision-making by investors, creditors and regulators. However, at least 40 per cent of companies do not yet meet these requirements , because of low awareness and preparation, according to accounting firm Grant Thornton. For smaller unlisted companies with fewer resources, incentives should be provided to encourage them to take “baby steps”, such as enlisting a consultant to help them set up a system to monitor and improve their climate resilience and sustainability performance, Tan said.