Good corporate citizenship - the onus is all of us when decides to invest

Most Hong Kong investors may not care much about corporate citizenship when deciding whether or not to invest. They'd better start doing so now because corporate citizenship has become a major consideration of big, mostly institutional, investors in the United States and other economies in building their global portfolios.

These investors have publicly declared their intention to include environmental, social and corporate governance issues in the key metrics of their investment decisions, according to a report in the New York Times. For instance, BlackRock - one of the world's largest asset managers - said earlier this year it might pull its investments in companies that fail to take such issues seriously, the report said.

The strategies and preferences of institutional investors are of great importance to Hong Kong's global capital market. Their large investments in the local bourse have established Hong Kong as the most convenient market for regional, including Chinese mainland, companies to tap into the international pool of long-term capital.

A listing in Hong Kong is not enough. It will take more than earnings prospects to attract the attention and court the favor of these institutional investors. To do that, corporate managements need to remember the abbreviation ESG, which stands for environmental, social and governance.

It's believed that companies that ignore all these three attributes, especially governance, are not going to do well in the longer term because their undisciplined and unprincipled business models simply cannot be sustainable. Among the Hong Kong companies widely considered to have shown a proven track record of good corporate citizenship are the two utilities - CLP and Towngas.

In the public's perception, property companies rank among the lowest as they're seen to have paid little heed to environmental protection in the pursuit of profit and cornered the supply of homes to drive up prices to levels that few Hong Kong people can afford. In response to such charges, developers argued that they've made tremendous contributions to society by taking big financial risks in building homes to meet the public's insatiable demand.

As investors, you'll have to be the judge in picking the good corporate citizens of Hong Kong.

(HK Edition 06/30/2017 page7)