Building a culture of ESG
Value Partners’ Senior Director of Operations Mr. Kuan Yu Oh joined a group of panelists to speak at a panel during the IR Annual Symposium 2021, organized by The Hong Kong Investor Relations Association on 14 December 2021. During the panel, Mr. Oh shared some practical tips about creating an Environmental, Social and Governance (“ESG”) culture from a corporate perspective.
Quoting from the Financial Conduct Authority, Mr. Oh said that “companies do not exist in isolation. Successful and sustainable businesses underpin our economy and society by providing employment and creating prosperity. To succeed in the long-term, directors and the companies they lead need to build and maintain successful relationships with a wide range of stakeholders. These relationships will be successful and enduring if they are based on respect, trust and mutual benefit.”
To achieve this, a company’s culture should promote integrity and openness, value diversity and be responsive to the views of shareholders and wider stakeholders, and this usually comes from the top from a firm’s corporate governance practices.
At Value Partners, the company adopts sound corporate governance principles that emphasize a quality Board, effective risk management and internal control, stringent compliance practices and transparency and accountability to all stakeholders, Mr. Oh said.
The company advocates board diversity and the independence of the Non-executive Directors who make up the majority seats of the Board and play important roles, Mr. Oh said. They meet regularly with the company’s management each year, in the absence of the Executive Directors, to discuss the company’s development and respond to shareholders’ enquiries. The Group’s Audit Committee and Remuneration Committee are chaired by Independent Non-Executive Directors.
Mr. Oh also emphasized the importance Value Partners places on risk management and internal control. He mentioned that the Board is responsible for overseeing the risk management and internal control systems of the Group and reviewing their effectiveness at least annually. The Audit Committee assists the Board in fulfilling its oversight and corporate governance roles in the Group’s financial, operational, compliance, legal, risk management and internal controls, and the internal audit function. The Group has also established an organizational structure with defined levels of responsibility and reporting procedures called “Three Lines of Defense”.
As a listed company, Value Partners is also aware of its role in promoting a more sustainable business by evaluating ESG factors and their impact on the business’ overall operations. When it comes to these factors, Value Partners’ Board provides overall direction on the management of sustainability issues and ESG risks. The implementation and reporting of ESG initiatives are carried out by the ESG Committee and the Company Secretary with approval by the Board, which is also responsible for collaborating with other functional areas on the integration and implementation of sustainability initiatives through the company.
As an asset management company, Mr. Oh said that ESG should also be embedded in the investment level to build a culture of ESG.
While ESG factors have only received attention in recent years, it has long been integrated into Value Partners’ corporate governance and investment decision-making process, according to Mr. Oh.
Since the inception of Value Partners in 1993, corporate governance has been one of the three major considerations deeply embedded in its investment philosophy, which is to identify the companies with the 3Rs: the Right business run by the Right people and at the Right price. The Group’s emphasis on the Right people addresses the governance quality analysis, which the company believes is crucial to act in the best interest of shareholders, and also a key driver for business’ sustainability and value creation.
As markets evolve and more corporate disclosures have become available, ESG considerations have become an intrinsic part of the Group’s investment process.
Mr. Oh noted that ESG considerations have been incorporated as an integral part of Value Partners’ investment process, as the market has evolved and the disclosure of information has been improving. The company believes that ESG considerations will play an increasingly important role in differentiating risks and opportunities for its investees in the region.
Value Partners makes use of a “three-step” model for responsible investing. At the initial stage, Value Partners applies negative screens to define the ESG-considered investible universe. It incorporates ESG assessment into the investment teams’ fundamental research and engage with its investees. This is implemented through the company’s proprietary ESG Scorecards, which are formally integrated into investment process. Portfolio scores and the level of ESG risk rating are regularly reviewed by the ESG Committee. The Committee will also seek the portfolio manager’s explanations and justifications for the ESG risk undertaking.
About IR Annual Symposium 2021: This half-day event brought together over 100 guests from the local and overseas IR industry, investment community, as well as C-levels and senior management representatives of listed companies, and other finance market elites, to exchange insights and engage in lively discussions on the latest and most relevant topics in the industry.
The views and opinions expressed are the views of the conference speakers only and do not necessarily reflect the position of Value Partners and any organizations. Any content provided by the conference speakers are of their opinion and are not intended to malign any religion, ethnic group, club, organization, company, individual or anyone or anything. The information provided does not constitute investment advice and it should not be relied on as such. All material has been obtained from sources believed to be reliable as of the date of presentation, but its accuracy is not guaranteed. This material contains certain statements that may be deemed forward-looking statements. Please note that any such statements are not guarantees of any future performance and actual results or developments may differ materially from those projected.