Telum Talks To... Ruban Yogarajah, Head of ESG, Finsbury
China’s green transition creates unprecedented opportunities for companies with effective environmental, social and governance (ESG) strategies and communications, according to a recent webinar hosted by strategic comms agency Finsbury, which has an Asia footprint in Hong Kong, Beijing, Shanghai, Singapore and Tokyo.
Titled “Pulse: Getting to the Heart of ESG in Greater China”, the event was co-hosted with SynTao, a CSR consultancy in China, and featured representatives from Hong Kong Exchanges and Clearing (HKEX) and CDP (formerly the Carbon Disclosure Project, an international non-profit). Telum caught up with Ruban Yogarajah, Finsbury’s Head of ESG, about the webinar and ESG in the region.
There is a much greater focus on ESG globally right now. Why is that?
We’ve really reached a tipping point. We’re seeing up to 80 per cent of consumers in some markets change their preferences based on perceived sustainability. More than 50 per cent of international institutional investors now use ESG data when valuing assets as this helps achieve better returns. And governments in countries, regions and cities making up more than 50 per cent of global GDP (including China and South Korea) have adopted net zero targets for greenhouse gas emissions with the promise of new regulation that will transform their economies.
COVID-19 has accelerated these trends. ESG is now more critical than ever to businesses’ profitability and valuation as well as their ability to address urgent social and environmental problems. And we expect the pace of change will remain high as governments focus on a green recovery from the pandemic, the world comes together for the COP26 climate conference, and new EU sustainable finance rules reshape investor approaches globally.
How aware of ESG are companies in Asia compared with other markets such as Europe and the US?
Companies in Europe and the US may have been talking about ESG for longer but the speed with which it’s gone from "nice to have" to "must do" has caught most businesses by surprise - no matter where they’re based.
In Asia, there is still ground to make up but we’re seeing a very significant increase in awareness driven by different factors in each market. For example, in Greater China the prospect of new disclosure rules for the Hong Kong, Shanghai and Shenzhen stock exchanges is helping move ESG up the board with all eyes on the next five-year plan. In Japan, the conversation has gone on longer thanks to GPIF’s stewardship. Meanwhile, Singapore is competing hard to become a global centre for green finance. This creates different opportunities from companies to get ahead in each country.
What were the main takeaways from your recent webinar about ESG in Greater China?
We all agreed that ESG creates huge opportunities for companies that move quickly and smartly. The businesses that get their strategies and communications right can grow quicker, recruit better talent, access lower cost funding and manage risk more effectively. But this requires leadership at board level, technical knowledge around key ESG issues and actively getting the story out to customers, employees, shareholders, and policy makers - just relying on sustainability reports won’t work.
For multi-national companies operating in China there is also a balance to be struck between adopting an approach that’s consistent with the global strategy and tailoring actions and communications to the local context.
What are the issues that companies in Greater China are facing?
My colleagues in China are clear that environmental issues will continue to take a front seat in the ESG debate - particularly with Xi Jinping’s carbon neutrality target for China. But social issues are rising up the agenda. The Hong Kong Stock Exchange’s new disclosure rules upgraded companies’ social KPIs and businesses are already facing much more scrutiny of supply chain issues.
More broadly though, more companies in Greater China need to start recognising the opportunities created by ESG. Most businesses are currently focused on the regulatory requirements they need to manage. The next step is integrating ESG into product, operations, financing and people strategies in order to create commercial value.
How does ESG affect communicators?
Communicators have a critical role in the development of ESG strategies. They bring the stakeholder voice to the table - helping companies understand which issues shareholders, customers, employees and policy makers care about and the trends that may change expectations.
Companies that are strong ESG communicators have a clearly defined purpose with ESG integrated fully into their corporate narrative. This means building the right messages into the equity case, employee value proposition and corporate communications. Businesses need good disclosure to build credibility, but the best companies go beyond that to tell stories that convey the character of their organisation and its values. And communicators have a critical role in ensuring that these are relevant and tailored to each market.
What is the best practice for ESG?
We have a three-step process for helping companies develop their ESG strategy and communications. First, we work with them to develop strategy by identifying which ESG issues are most important to their reputation, where better communication can make a difference and where action is required - using perception studies, benchmarking and trend analysis. Then we help businesses define what they stand for - whether it’s their purpose and values, the investor story or their position on key issues like climate change - testing messages to ensure they resonate with the target audience. Finally, we help get the message out with integrated campaigns that are best used in class media and digital strategies as well as targeted investor, employee and government engagement.
There are two keys to making this work. First, it’s critical to work across disciplines and break down some of the traditional barriers between communications, investor relations and public affairs. Second, companies can build support more effectively when they consult employees and shareholders on their plans and make them partners in decisions. ESG communications work best when they are a conversation not a broadcast.