© 2023 KPMG Advisory (Hong Kong) Limited, a Hong Kong (SAR) limited liability company and a member firm of the KPMG global 
organisation of independent member firms affiliated with KPMG International Limited, a private English company limited by guarantee. 
Printed in Hong Kong (SAR).
On the 2023 ESG 
committee agenda
2022 Analysis of ESG Practice Disclosure1 by the Hong
Kong Exchanges and Clearing Limited (HKEX) shows that
over 95% of the sample issuers disclosed how the board
oversees and manages ESG issues. Sample issuers
provided information on (i) the ESG governance structure;
and (ii) where there is a designated working group or
committee for ESG matters, the roles and duties of such
working group or committee.
Our research shows that around 71% of the Constituents
in Hang Seng Index are now having some form of ESG
committee – whether that be described as an ESG
committee,
a
corporate
governance
committee,
sustainability
committee,
governance
committee,
sustainable development
committee or
environmental
campaign committee, etc.
While each ESG committee will have its own specific
terms
of
reference,
drawing
on
insights
from
our
interactions with directors and business leaders, we
highlight seven issues for ESG committees to keep in
mind as they consider and carry out their 2023 agendas.
Clarityofpurpose
Oversight of ESG risks and opportunities is a significant
challenge, involving the full board and potentially multiple
board committees. For example, elements of climate such
as
disclosure
and
DEI
are
overseen
by
the
ESG
committee, with assistance from other committee such as
Nomination and Governance committee.
Guidance on
Climate Disclosures2 by the HKEX recommends two
governance structures that organisations can follow, the
integrated approach and the dedicated approach. In the
integrated
approach,
management
of
climate-related
issues
is
integrated
into
existing
standing
board
committees
(e.g.
audit,
governance,
nomination,
remuneration and risk committees). While a standalone
committee is established in the dedicated approach.
On the 2023 ESG 
committee agenda
KPMG Board Leadership Centre 
Consideration needs to be given to the coordination
between committees as well as the information flows to
the
committees
from
the
corporate
functions
(risk,
operations, legal, etc.) and from the committees to the
board itself. For example, climate change might initially
appear to reside with an ESG committee, but it will also
likely touch the audit committee (data, the systems that
produce that data, and the disclosures within the annual
report),
the
remuneration
committee
(management
incentives), and the nomination committee (the skills and
experience of board members and senior management).
Overlap is to be expected, but this puts a premium on
information sharing,
communication,
and coordination
between the committees. It also requires that committees
have the expertise to oversee the issues delegated to
them.
AnESGcompetentboard
Oversight of ESG risks – and equally importantly, the
opportunities – starts with an ESG-competent board. Not
every board member needs to have deep-dive ESG
expertise, but the board, as a whole, needs to have ESG
risk and its impact on opportunities such as long-term
value creation, top of mind. They need to understand
which issues are of greatest risk such as business
resilient and sustainability or strategic significance to the
company, how they are embedded into the company’s
core business activities, and whether there is strong
executive leadership behind the company’s response to
ESG matters.
Individual member of ESG committee may have different
expertise on different topics. The ESG committee can play
an active role in educating not just the committee
members, but the whole board, on ESG issues including
the landscape of stakeholder expectations and demands
and its opportunities. Ask:
1 “"2022 Analysis of ESG Practice Disclosure ", HKEX, November 2022
2 “"Guidance on Climate Disclosures", HKEX, November 2021
How companies address climate change, diversity, equality and inclusion (DEI) issues, and
other ESG risks is now viewed – by investors, research and ratings firms, activists, employees,
customers, and regulators – as fundamental to business and critical to long-term sustainability
and value creation. Especially when facing a cost of living crisis and economic headwinds,
oversight of these risks and opportunities will be a significant challenge, involving the full board
and potentially multiple board committees. Now is the time for boards to ‘hold their nerve’ in
doing what’s right over the long-term.

© 2023 KPMG Advisory (Hong Kong) Limited, a Hong Kong (SAR) limited liability company and a member firm of the KPMG global 
organisation of independent member firms affiliated with KPMG International Limited, a private English company limited by guarantee. 
Printed in Hong Kong (SAR).
On the 2023 ESG 
committee agenda
•
Is the board ESG literate and is it structured to engage
meaningfully on ESG issues potentially as diverse as
modern slavery and human rights, energy efficiency
and
renewable
energy
transition,
scope
three
emissions
and
other
supply
chain
issues,
and
reporting.
•
Proposed
reporting
standards
(e.g.,
the
ESG
Reporting Guide of HKEX, Sustainability Accounting
Standards
Board
of
International
Sustainability
Standards Board (ISSB),
Sustainability Reporting
Standards of Global Reporting Initiative and Task
Force
on
Climate-Related
Financial
Disclosures
(TCFD)) will require boards to report on how they
ensure that the appropriate skills and competencies
are
available
to
oversee
strategies
designed
to
respond
to
sustainability-related
risks
and
opportunities.
•
Does the board evaluation process assess whether
the board has the right mix of skills and whether the
ongoing development activities are sufficient?
•
How does the board get ESG literate?
•
Are
ESG
matters
(including
issues
around
DEI
empathetic leadership, etc.) a factor when hiring
directors and the executive team?
Work with the company secretary and senior executives to
determine how best to get up to speed and build a strong
foundation for informed oversight. Consider continuous
conversations with the key players in the business and
deep dives within committee meetings, alongside in-house
briefings and externally organised training opportunities.
Engage proactively with shareholders and other
stakeholders
Investors are increasingly holding boards accountable for
ESG matters and are eager to understand whether boards
have sufficient knowledge and adequate processes to
oversee the management of the key ESG-related risks
and to provide informed, proactive guidance as stewards
of long-term value.
And beyond the investor community, other stakeholders,
whether
that
be
employees,
customers
or
the
communities that provide companies their licence to
operate, are also voting with their feet against companies
they perceive to be paying insufficient attention to ESG
issues – whether that be related to climate change
matters, diversity and inclusion issues and the treatment
of individuals, or the company’s contribution to society
through (say) responsible taxation.
Good stakeholder engagement – particularly through the
supply chain – can also provide an opportunity for the
company to encourage others to behave responsibly and
‘do what’s right over the long-term’.
To best understand the views of its key stakeholders and
the ability of the company to exert responsible influence,
the
board
should
request
periodic
updates
from
management as to the effectiveness of the company’s
engagement activities:
•
Does the company engage with, and understand, the
ESG
priorities
of
its
shareholders
and
key
stakeholders?
•
Are the right people engaging with these shareholders
and stakeholders – and how is the investor relations
(IR) role changing (if at all)?
•
What is the board’s position on meeting with investors
and
stakeholders?
Which
independent
directors
should be involved?
•
Will
the
organisation
be
open
to
criticism
from
activists? Does the board have a road map to defend
themselves?
In short: Is the company providing investors and other
stakeholders with a clear picture of its ESG performance,
its challenges, and its long-term vision (or ambition) – free
of “greenwashing”? (Investors, other stakeholders, and
regulators are increasingly calling-out companies and
boards on ESG-related claims and commitments that fall
short – and all indications are that they will continue to do
so.)
EmbedESG,includingclimate risk and DEIissues,
intoriskandstrategydiscussions
How companies address ESG risks is now viewed – by
investors,
research
and
ratings
firms,
activists,
employees, customers, and regulators – as fundamental
to business and critical to long-term sustainability and
value creation.
Climate change as a financial risk has certainly become
more urgent over the last few years – not least because of
the accelerating physical impacts of the climate crisis –
the frequency and severity of floods, wildfires, rising sea
levels, and droughts.
But for many, the associated “transition risks” are as
important and arguably more immediate – whether that be
tax and regulatory interventions, technological changes, or
changes in customer behaviours. A challenge for the ESG
committee is to help ensure that these transition risks are
properly addressed as the company plots its future
strategy – together with other climate change risks.
Equally, some of the challenges within the ‘S’ of ESG
have rapidly risen up the agenda in recent years. Social
factors such as how a company manages its relationships
with its workforce, the societies in which it operates, and
the political environment, are now central to a company’s
financial performance. Wellbeing and DEI issues have
become mainstream.
Several fundamental questions should be front-and-centre
in boardroom conversations about the company’s ESG
journey – not least how material ESG risks are identified
and assessed in line with the organisation’s risk appetite.
Embedding ESG identification and assessment into the
existing enterprise risk management process might be a
good starting point, however it is important to avoid
focusing only on the downside risks. The ESG committee
should also encourage management to consider the
potential for innovation, disruption and value creation
posed by ESG activities. Businesses that see through
effective
ESG
investments
to
realise
transformative
growth
will
have
the
upper-hand
as
economies
strengthen, whereas delaying key ESG initiatives could
leave businesses behind the curve and exposed to rapidly
changing stakeholder expectations and regulation.

© 2023 KPMG Advisory (Hong Kong) Limited, a Hong Kong (SAR) limited liability company and a member firm of the KPMG global 
organisation of independent member firms affiliated with KPMG International Limited, a private English company limited by guarantee. 
Printed in Hong Kong (SAR).
On the 2023 ESG 
committee agenda
After determining which ESG issues are of strategic
significance. How is the company embedding them into
core
business
activities
(strategy,
operations,
risk
management, incentives, and corporate culture) to drive
long-term performance? Is there a clear commitment and
strong leadership from the top, and enterprise-wide buy-
in?
On behalf of the board, the ESG committee could
consider:
•
How is the ESG lens applied to the organisations
strategic thinking?
•
Is ESG thinking incremental to Business as Usual
(BAU) (a bolt-on to the existing strategic thinking) or is
it transformative?
•
Is the board playing an active role in developing and
supporting any transition plan? Is it an iterative
process
–
with
milestones
and
opportunities
to
recalibrate – and does it bring in perspectives from
throughout the organisation and beyond?
•
Does the process challenge the validity of the key
assumptions on which the company’s strategy and
business model are based? Is there a case for taking
a ‘clean sheet’ approach to the strategy / business
model, asking what our business would look like if we
started up today?
•
How does the board establish a culture that supports
the transition towards a more purposeful ESG oriented
organisation?
•
How does the board address the tensions between the
‘E’ and the ‘S’? For example, failure to put in place an
energy transition plan while retiring a fossil-fuel reliant
asset could introduce imbalance in labour markets,
cause disorientation of social priorities and promote
less than ideal work environments, which may result in
increased social inequality, strikes, civil unrest or
reduced productivity, etc.
•
Could you explain what happened if your company
ceased to exist in 10- or 15-years’ time? What didn’t
you see coming that caused you to go under?
•
Are
the
incentives
connected
with
executive
compensation and the compensation philosophy of the
organisation as a whole a fit for purpose? When
compensation becomes intertwined with something
like ESG, other systems and processes quickly fall in
line: recruitment, training and development, strategic
planning, performance management.
•
What metrics are monitored and reported to ensure
the organisation is on track?
Driving thetransition towards amore purposeful
ESGorientedorganisationthroughculture
Given the critical role culture plays in integrating ESG
factors throughout an organisation, the ESG committee
can play a role in helping the board take a more proactive
approach in understanding, shaping, and addressing any
necessary cultural changes by considering:
•
Does the board understand the culture it wants within
the organisation?
•
Are key
processes aligned
with desired
culture?
Hiring,
promotion,
reward,
etc.,
and
how
poor
behaviour is addressed.
•
Is culture embedded into decision-making processes?
An organisation is not truly living its values until it costs
it money. There has to be a price to pay such as
turning
down
a
profitable
business
opportunity
because
the
customers/clients
values
or
modus
operandi are at odds with your own organisational
culture. It is at this point that the culture is seen as
truly embedded and operational.
•
How does the board measure the culture and get
assurance that it is what they think it is? What are the
different
inputs?
How
can
the
board
pull
them
together?
•
Is the board leading the charge from the top? Are the
board and the senior executive team presenting a
unified front? Culture starts with the board and it is
often the little things that matter.
Systems,controlsanddata
The quality of data for both strategic decision-making and
reporting is crucial and the ESG committee can play a role
in challenging the relevance and propriety of collected
data and the systems that produce it. Is there substance
behind collected and reported data? What additional
assurance might be required?
Collecting data in a consistent method is important,
especially for businesses with global operations and
multiple product
lines.
In some cases,
there is an
established standard that is accepted by almost all
investor groups.
For example, the Greenhouse Gas Protocol is widely
recognised as a way to report on emissions. Still, tracking
greenhouse gas emissions means companies need to
have all those responsible for collecting data to gather it in
the same way.
Every level of the business should understand the metric,
and how it is calculated and reported but also why the
data is being collected and what does it show? The ESG
committee can help reinforce the connections between
metrics and financial performance and prospects.

© 2023 KPMG Advisory (Hong Kong) Limited, a Hong Kong (SAR) limited liability company and a member firm of the KPMG global 
organisation of independent member firms affiliated with KPMG International Limited, a private English company limited by guarantee. 
Printed in Hong Kong (SAR).
On the 2023 ESG 
committee agenda
The ESG committee can also play a role in questioning
the scope and type of assurance the company is getting
on ESG metrics; what is being assured, and by whom;
and the value of the assurance received?
There’s no single approach to ESG assurance. While it
may be distinct for every industry and company, it’s critical
for companies to begin to identify their priorities before
pressure from customers, shareholders, and others push
to accelerate the company’s timeline.
Assurance maps – which will be familiar to many audit
committees – provide a visual and easy way to digest the
effectiveness
and
completeness
of
a
company’s
assurance activities.
Clarity over the assurance provided by the ‘four lines of
defence’
can
also
help
identify
any
ESG
risks
or
disclosures which require additional assurance to achieve
the desired level of comfort, or any risks that are being
excessively mitigated as a result of duplicated assurance
activities.
ESG committees might work in conjunction with a properly
scoped, funded and trained internal audit function (and
perhaps the audit committee) to understand which areas
merit assurance. For example, labour in the supply chain
could be a key area where a retail company’s customers
may want assurance. Or a consumer goods company’s
shareholders may want assurance on their claims of
sustainable sourcing. Given its understanding of the rigour
required to get the numbers right, the ESG committee can
help the company decide how far the journey goes, even
potentially
working
toward
assurance
of
a
full
sustainability report.
Understanding the current landscape and the company’s
way forward, coupled with strategic investment in data
collection and integrity, not only responds to stakeholder
demands,
but
also
may
expand
an
organisation’s
perspective, exposing new risks to its business model
along with opportunities for growth and transformation.
This is the true significance of bringing standardisation
and rigour to ESG measurement (and reporting).
Reportingtoinvestorsandotherstakeholders
Investors and other stakeholders want to understand
which issues are of greatest risk or strategic significance
to the company,
how they are embedded
into the
company’s core business activities, and whether there is
strong executive leadership behind the ESG efforts as
well as enterprise-wide buy-in.
Identifying what information to report (i.e. what is material)
is more nuanced than for financial statements and should
consider what matters in the short, medium and long term.
Principles differ between sets of sustainability reporting
standards. What do investors need to know to understand
the value of the business and its prospects? What other
information do wider stakeholders need? How will you
structure reporting to include investor-relevant information
within
the
annual
report,
but
avoid
unnecessary
duplication with other broader communications?
To
that
end,
the
ESG
committee
can
encourage
management teams to reassess the scope and quality of
the company’s ESG reports and disclosures.
How is the company benchmarking against peers? What
reporting frameworks have been considered? Are risks
explicitly stated and disclosure provided on how they are
mitigated? Is the link to the strategy clear?
Some critical questions for the ESG committee to consider
include:
•
What are the ESG issues that align most closely to the
company’s and stakeholders’ priorities?
•
What are the ESG issues that drive the company's
financial performance and prospects?
•
Is the company currently reporting on its ESG efforts,
and where?
•
Do
the
company’s
disclosures
comply
with
the
appropriate
laws,
regulations
and
sector
best
practices?
•
Do the company’s disclosures reflect both what the
company is doing now and where it is going, with
accompanying metrics and goals.
•
Is ESG-related data handled appropriately and aligned
with corresponding regulations and the level of risk
associated with the data.
•
Is the ESG information included within the annual
report monitored with the same rigour as conventional
financial data?
•
What are competitors measuring and reporting? Are
there
emerging
regulatory
requirements
that
a
company should be aware of?
Lastly, stay alert to local regulatory bodies’ (e.g. HKEX
and
Hong
Kong
Monetary
Authority
(HKMA))
developments they finalise in relation to new ESG-related
reporting standards and disclosure requirements e.g. in
June 2022,
HKMA issued a circular which sets out the
two years plan on supervision of climate risks integrate
climate risk into the supervisory processes.
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© 2023 KPMG Advisory (Hong Kong) Limited, a Hong Kong (SAR) limited liability company and a member firm of the KPMG global 
organisation of independent member firms affiliated with KPMG International Limited, a private English company limited by guarantee. 
Printed in Hong Kong (SAR).
On the 2023 ESG 
committee agenda
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kpmg.com/cn/socialmedia
Angus Choi
Partner, Advisory
Climate and Sustainability
Tel: +852 2847 5160
angus.choi@kpmg.com
Kelvin Leung
Partner, Head of Governance, 
Risk and Compliance, South 
of China 
Tel: +86 (755) 2547 3338
kelvin.oc.leung@kpmg.com
Frank Mei
Partner, Head of Governance,
Risk and Compliance, China
Tel: +86 (10) 8508 7188
frank.mei@kpmg.com
Haoyu Liu
Partner, Governance, Risk 
and Compliance 
Tel: +86 (10) 8553 3343
haoyu.liu@kpmg.com
Johnson Li
Partner, Head of Governance, 
Risk and Compliance, North 
of China 
Tel: +86 (10) 8508 5975
johnson.li@kpmg.com
Alva Lee
Partner, Head of Governance,
Risk and Compliance, Hong 
Kong
Tel: +852 2143 8764
alva.lee@kpmg.com
Wei Lin
Partner, Head of 
Environmental, Social and 
Governance
Tel: +86 (21) 2212 3508
wei.lin@kpmg.com
Pat Woo
Partner, Head of ESG, Hong 
Kong
Global Co-Chair, Sustainable 
Finance,
Tel: + 852 3927 5674
pat.woo@kpmg.com
Vera Li
Partner, Governance, Risk 
and Compliance 
Tel: +86 (10) 8508 5870
vd.li@kpmg.com  
May Gao
Director, Governance, Risk 
and Compliance 
Tel: +86 (10) 8508 5390 
may.gao@kpmg.com