Survey: Hong Kong's green finance has significantly expanded, with 58% of Hang Seng Index companies deploying AI to accelerate ESG transformation.

The 14th Hong Kong Corporate Governance Survey Report released by PwC Hong Kong shows that large Hong Kong listed companies have made progress in ESG reporting disclosure levels, especially in climate-related disclosures and green finance, but there are still a considerable number of companies unprepared. In terms of technological advancement, over half (58%) of large companies in the Hang Seng Composite Index mentioned that they have deployed or plan to deploy AI technology to enhance the accuracy of ESG data collection and reporting. To align more with international standards, the Hong Kong Stock Exchange (00388) has updated its ESG disclosure rules and now requires companies to fully disclose their climate-related governance, strategies, risk management, and indicators and targets. According to the report's pre-adoption scoring mechanism, as high as 41% of large Hang Seng Composite Index constituent companies are unprepared, which is concerning. These companies have vague disclosure content and insufficient information, particularly in risk management and climate goals, which could lead to compliance errors and reputational damage. Only 10% of companies are fully prepared, able to provide comprehensive disclosure, precise quantitative data, adhere to recognized frameworks, and undergo third-party verification. It is worth noting that the real estate and construction industry (50%) and utilities (30%) lead in climate disclosure preparedness, mainly due to their significant environmental impact. By 2024, 95% of large Hang Seng Composite Index constituent companies disclosed climate-related risks, an increase of 6% from 2023. 68% of companies' ESG reports are independently verified, an 8% increase compared to the previous year. However, only 11% of companies disclosed the quantified impact of climate change on finances, with only 4% showing detailed and comprehensive risk management processes. Additionally, 70% of companies disclosed Scope 3 greenhouse gas emissions. Xia Qi Cai, Consulting Partner at PwC Hong Kong, said, "Companies still hesitate to quantify the financial impact of climate change, fearing it will expose their competitive disadvantage or scare off investors. However, the market increasingly relies on climate disclosure to assess risks, and a lack of transparency actually undermines investor trust. As the deadline for the adoption of new regulations in 2026 approaches, we urge companies that are not fully prepared to take immediate action to enhance the quality of their Scope 3 greenhouse gas emissions disclosure and financial impact quantification reports. By not only meeting compliance requirements but also taking proactive measures to adapt to climate change, companies can enhance resilience and boost market confidence. While HKEX has made progress in disclosure standards, effectively driving companies beyond surface-level disclosure still requires clearer guidance and improved execution mechanisms." PwC Hong Kong analyzed the 2024 annual reports and ESG reports of 105 large Hang Seng Composite Index constituent companies to assess the level of disclosure on climate-related issues, validation, green finance, and technological innovation in large enterprises within the index. The survey report points out that in the 2024 ESG reports, 10 large Hang Seng Composite Index constituent companies disclosed that their green financing scale exceeded HK$50 billion, a 20% increase from the previous year, highlighting the rapid maturity of Hong Kong's sustainable finance sector. This growth trend also reflects that under supportive policies and increasingly stringent ESG disclosure requirements, Hong Kong is gradually emerging as a leading green finance center in Asia. Looking ahead 3-5 years, Yan Xinqi, Director of Consulting at PwC Hong Kong, believes that Hong Kong's development in the green finance sector will be further consolidated. Overall, 39% of large Hang Seng Composite Index constituent companies mentioned green finance tools in their ESG reports, a 3% increase from the previous year. Among the 41 companies that mentioned green bonds or ESG financing, 36 (88%) have actually issued related instruments. Disclosure levels have also improved, with 86% of issuing companies disclosing their green financing scale, indicating a gradual strengthening of market responsibility awareness. There are significant performance differences across industries: conglomerates (100%), financial services (95%), and real estate and construction (69%) companies continue to lead in green finance disclosure. The energy industry (+50%) and telecommunications industry (+33%) show the most robust growth in discussing green finance, reflecting a rapidly increasing interest in sustainable transition financing across industries. All companies in the financial services, materials, real estate and construction, telecommunications, and utilities sectors have issued green bonds, a significant increase compared to 2023. This change may be attributed to the capital-intensive nature of these industries and the opportunities brought by green projects. In contrast, companies in industries such as consumer goods, energy, healthcare, industrial, and information technology have not issued green bonds, consistent with the previous year. The overall scale of green finance has significantly expanded. In 2023, over half of green finance issuances were HK$10 billion or below. In 2024, 78% of issuances exceeded HK$10 billion, demonstrating a continued upward market momentum and highlighting the strategic importance of sustainable capital allocation in high-carbon emissions and capital-intensive industries. Yan Xinqi stated that against the backdrop of increasing global decarbonization pressure, Hong Kong has a leading advantage in the field of green finance. However, maintaining this leadership position requires regulatory agencies to collaborate with the industry to address disclosure gaps and properly manage technological risks, in order to maintain market trust and drive long-term growth. As major global markets such as Singapore and the European Union actively promote green finance policies, with Singapore launching the "2030 Green Plan" and the EU adopting the "European Green Bond Standard," it is clear that both the Hong Kong government and businesses are maintaining alignment and demonstrating their commitment to consolidating Hong Kong as a global sustainable financial hub and fulfilling their promise to build environmental and economic resilience. Over half (58%) of large Hang Seng Composite Index constituent companies mentioned that they have deployed or plan to deploy AI technology to enhance the accuracy of ESG data collection and reporting. Additionally, 92% of companies emphasized cybersecurity issues in their ESG reports, a significant increase of 10% from 2023. The Hong Kong Critical Infrastructure (Computer System) Ordinance will take effect in January 2026, and operators in key industries such as energy, finance, healthcare, communications, and transportation are facing greater legal and operational pressures, urgently needing to strengthen cybersecurity resilience. The rise of automation has raised concerns about data privacy, greenwashing behaviors, and compliance issues in society, but the existing regulatory framework still needs improvement. Only 69% of companies disclosed AI-related training or IT skill enhancement plans. It is worth noting that no company mentioned the international standard ISO 42001 for AI management systems. This underscores significant oversights in aligning companies with AI applications and emerging global standards. Furthermore, the survey found that in 2024, 34% of large Hang Seng Composite Index constituent companies linked their compensation policies to ESG key performance indicators (KPIs), but only 10% disclosed specific execution mechanisms. Xia Qi Cai concluded that cybersecurity and AI governance are no longer optional but key measures to maintain stakeholder trust and address increasingly stringent regulatory requirements. With the mandatory disclosure of new climate regulations approaching, Hong Kong listed companies must accelerate their transformation in ESG. Companies should shift their focus from reporting "quantity" to "quality," including investing in robust data systems, introducing independent verification, and benchmarking against international standards. This is not only a compliance requirement but also a key factor in securing future investments and enhancing competitiveness in an environment that increasingly values sustainable development and digital resilience.