DBS Bank and Bloomberg Media Studios recently conducted their inaugural survey of 800 SMEs across six markets (Singapore, Hong Kong, India, Indonesia, Mainland China, and Taiwan) in Asia. While Hong Kong SME business leaders acknowledge the benefits brought by focusing on environmental, social, and governance (ESG) issues, only 67% rate it a high priority for their business.
According to the survey, 71% of Hong Kong SME business leaders agree that ESG deployment can increase competitive edge, boost their companies’ reputation, and attract investors. They also expressed that ethical choice / social obligation (65%); a new business model influenced by customer demand (57%); and operational standards / legal mandates and guidelines (55%) are some of the key reasons that motivate them to transition to more sustainable business models.
Despite knowing that investing in ESG initiatives would benefit them in the long run, only 67% consider ESG as a high priority for their business.
SMEs in Hong Kong face various issues which prevent them from progressing to more ESG-focused business models. 63% of Hong Kong SMEs face challenges of needing to balance ESG with business growth and to transition business operations, as well as cost-related concerns (e.g., cost of deployment and difficulty to assess the valuation of return on investment (ROI) of investing in ESG initiatives). 59% mentioned they would need a standardised ESG framework as well as knowledge on how to produce a certified ESG report. 57% also feel they lack the technical know-how and access to ESG specialists, which is slightly higher than other Asia markets.
The survey also found that most Hong Kong SME business leaders see the “E” pillar in ESG as the most important consideration, followed by the “S” pillar. Three out of four (75%) SMEs feel that environmental issues regarding climate change, carbon footprint, depletion of natural resources, etc., are top priorities directly impacting their industries and businesses. Meanwhile, social factors such as employee well-being and work-life balance are also important, with 55% of SMEs focusing on this area. Business values such as Diversity, Equality and Inclusion (DE&I) are also priority areas for Hong Kong SMEs, with more than half (51%) integrating these into their key ESG initiatives.
Jolynn Wong, Head of SME Business Banking, Institutional Banking Group, DBS Hong Kong, said, “We believe that a ‘whole of industry’ approach is needed to substantially move the needle on sustainability across industries – this includes support from businesses, customers, and the government – to incentivise and raise awareness around the benefits of transitioning towards ESG-aligned business models. SMEs’ ESG journeys are often hindered by the lack of visibility across supply chains on sustainable suppliers and partners. When measuring the success and performance of ESG initiatives, discrepancies also often occur because of the lack of standardised frameworks and guidelines. As a strong advocate of sustainable development, DBS provides sustainable financing and advisory services, as well as transition finance frameworks, to help businesses kickstart their journeys towards more sustainable business models.”
To help partners and customers on their net zero journeys, all Relationship Managers (RMs) at DBS’ Institutional Banking Business Group, including SME Relationship Managers, are being trained to engage customers on their sustainability transition journeys. RMs are upskilled to integrate climate metrics into their customers’ portfolios and pave the way for future integration into credit assessment models. In addition, they are also being trained to:
• Identify financing opportunities to partner with their clients on the net zero journey;
• Shift customers’ portfolios to align with climate goals and;
• Identify risk management principles when advising customers on their transition journeys.
In September this year, DBS laid out its plans to strategically direct its financing towards lower-carbon activities. It was the first bank in Southeast Asia to announce a landmark set of decarbonisation commitments, with interim targets set for 2030. The commitments represent one of the most comprehensive sets of decarbonisation targets in the global banking industry and reinforce DBS’ commitment to net zero financed emissions by 2050.
In November, DBS Hong Kong together with CLP Power, launched industry-leading sustainable financing solutions to help companies, regardless of their scale, transition to more sustainable business models. To help seafood company Koon Tat Kai move towards a more energy-saving business model, DBS Hong Kong offered banking support with preferential pricing upon the completion of an energy audit with CLP Power while CLP Power provided extensive guidance on energy consumption and best practices for Koon Tat Kai to maximise energy efficiency.
