How digital tech can help companies improve ESG reporting, fight climate change

Developments in fintech and green technology have led to greater sophistication in analysing ESG related data, says FTSE Russell’s Helena Fung
All of the nearly 2,500 Hong Kong-listed companies are required to publish annual sustainability reports on their ESG performance

Business of climate change

Martin Choi

Published: 3:00pm, 16 Oct, 2022

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Digital technology can help companies improve ESG reporting and track their progress, as pressure mounts on firms to prove their contributions to fighting climate change, according to analysts.

Collecting and analysing data related to firms’ environmental, social and governance progress has grown in importance as countries around the world have made pledges to reduce emissions and tackle climate change.

“Data has been at the heart of many conversations about how we move forward and drive progress in implementing sustainability,” Helena Fung, head of sustainable investment in Asia-Pacific at FTSE Russell, said at a webinar hosted by the Asian Financial Forum on Thursday.

Along with greater sophistication in analysing data over the past 18 months because of developments in fintech and green technology, there is also a greater desire to measure impact and outcomes, Fung added.

All Hong Kong-listed companies are required to publish annual sustainability reports on their ESG performance. Photo: Bloomberg

Disclosure of ESG issues is the first step in order to allow investors to measure the impact of a firms’ business activities, according to Tim Chan, head of sustainability research for Asia-Pacific ex-Japan at Morgan Stanley.

“Without data, you do not have the basis for measurement. In terms of [ESG] disclosure, we are seeing really encouraging signs in Hong Kong,” said Chan, who was on the same panel.

Over 90 per cent of the constituents of the MSCI Hong Kong index, comprising large and mid caps, report carbon dioxide emissions in their annual reports, compared with an average of 62 per cent in the Asia-Pacific markets, said Chan.

All of the nearly 2,500 Hong Kong-listed companies are required to publish annual sustainability reports on their ESG performance alongside mandatory periodic financial reports.

In 2020, Hong Kong Exchanges and Clearing, the bourse operator, included core elements of the internationally-adopted Task Force on Climate-Related Financial Disclosures (TCFD) reporting framework as part of mandatory requirements in Hong Kong. These include scope 1 and 2 emissions, which are generated directly by companies’ own facilities, or indirectly through externally bought energy, respectively.

As larger firms begin reporting on their scope 3 emissions, which includes those from activities along their supply chain, small and medium-sized enterprises will also need to align with policy guidelines relating to ESG practices if they want to do business with large corporations, according to Lian Chan, vice-president of the Hong Kong Small and Medium Enterprises Association.

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Access to high-quality ESG data and climate-related technology infrastructure will help firms implement their decarbonisation strategies, said panelists at the Hong Kong Green Finance Association’s annual meeting in late September.

“Interpretation of data requires technology,” said Jason Tu, CEO and co-founder of sustainability data provider MioTech at the panel.

“The scope of ESG and sustainability is very broad, and the [amount of] data that we’re talking about is very large and ever growing in scope. Technology can help enhance the data and process it into meaningful forms.”

Amid a slew of different reporting frameworks and regulation, many firms and start-ups have introduced technological tools that can help companies report their ESG progress.

Last month, blockchain start-up InnoBlock Technology launched an ESG data platform, TTGreen, on cloud computing services provider Amazon Web Services.

The platform automatically tracks and reports standardised ESG data on resource consumption and carbon emissions using software and sensors deployed throughout an organisation’s information technology infrastructure.

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“Collecting data for ESG reports is very time-consuming. TT Green helps users automatically transmit and integrate the data in the cloud,” said CEO Kevin Ng.

TTGreen collects third-party data, including smart buildings’ water and electricity consumption, through Internet of Things sensors embedded along the supply chain of companies, said Ng.

Companies will need to manage their carbon emissions as a first step to achieving carbon neutrality, said Marco Su, senior manager at Amazon Web Services.

“Companies will need to know how to carry out data collection, analytics and may also need some AI (artificial intelligence) and machine learning to optimise” their operations, said Su.

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