On 17 February, HSBC and CECEP Environmental Consulting Group Limited (“CECEPEC” ) jointly released the 2024 annual update of the ‘HSBC Greater Bay Area ESG Index’. The report shows that the overall ESG performance of the Greater Bay Area has been steadily improving, with the average value of the regional index hitting a new high in the fourth quarter, up 3% year-on-year to 130.76. Meanwhile, the industry sub-index has also improved significantly, up 20% year-on-year to 223.20.

The report noted that the Greater Bay Area excelled in the policy arena and made significant progress in corporate governance last year. The governments of Guangdong and Hong Kong introduced policies one after another to support the development of high-tech industries, while accelerating the upgrading and transformation of traditional industries and promoting the smooth succession of new and old kinetic energy. Led by this, the ESG performance of companies in the Greater Bay Area has continued to improve, with the ESG disclosure rate of listed companies in the region reaching 76 per cent for the financial year 2023, an increase of three percentage points from the previous year. Over the past five years, companies in all cities in the Greater Bay Area have achieved sustained improvements in sustainability disclosure.

HSBC China Vice President and Head of Greater Bay Area, Mr Chen Qingyao, said that as a key innovation centre in China, the Greater Bay Area has leading strengths in high-tech industries. Governments at all levels in the region have released a number of policies over the past year to promote the development of new quality productivity, further defining the future development priorities of the Greater Bay Area, accelerating the development of emerging industries such as semiconductors and integrated circuits, artificial intelligence, and high-end equipment manufacturing, and actively laying out the future of industries such as quantum science and technology, and life sciences. Chen Qingyao believes that this will create new momentum for the green development of the Greater Bay Area.

The research shows that the ESG performance of all key industries in the Greater Bay Area in 2024 has improved compared to the previous year, with the Consumer Discretionary industry being the best ESG performer last year due to its progress in the area of climate action and the government's increasing policy support. The report also assesses the ESG performance of companies of different sizes in the region for FY2023. The results show that both large companies and small and medium-sized enterprises (SMEs) have significantly improved their ESG performance, with the ESG Company Sub-Indexes - Large Company Index and Small and Medium Company Index - achieving year-on-year growth of 14 per cent and 15 per cent respectively.

Liao Yuan, Executive Director and General Manager of China Energy Conservation & Environmental Protection (Hong Kong) Investment Co., Limited, said that SMEs in the Greater Bay Area are steadily advancing the construction of their ESG management systems, with more and more companies establishing an ESG governance structure at the board level, assessing and managing ESG risks, and some even linking the remuneration of their senior management to the company's ESG performance. As the backbone of economic development, the improved ESG performance of SMEs will lay a more solid foundation for the high-quality development of the Greater Bay Area economy.

The report also provides an in-depth analysis of the role of the financial sector in achieving sustainable economic development, pointing out that substantial financial support is required to achieve the zero carbon target. In addition to providing financing for green industries and projects through green finance, transition finance is also needed to support traditional industries in achieving low-carbon emission reduction. Currently, China is actively promoting the development of standards for transition finance to provide assistance to traditional industries in realising energy saving and emission reduction through technological transformation.

Overall, the continued progress of the Greater Bay Area in the ESG area is not only due to the support of policies and the efforts of enterprises, but also the active participation and promotion of the financial industry. With the successive transformation of old and new kinetic energy, the Greater Bay Area is expected to take more solid steps on the road to green development.