Issue 1 Volume 20 January 2024 DRIVING BUSINESS SUCCESS ESG ASSURANCE Challenges and opportunities for companies adopting assurance of their ESG reporting BCG & ESG AWARDS Why equal attention to ESG and corporate governance is needed SECOND OPINIONS How can accountants support transition finance and planning for businesses? PLUS: LEADING WITH PURPOSE Roy Leung, the Institute’s new President, on his plans for elevating the profession and members in the year ahead
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PRESIDENT’S MESSAGE APLUS DEAR MEMBERS January 2024 1 Roy Leung, President “ Together, we embark on an exciting journey into the future, marking a new era for our Institute following the momentous 50th anniversary and significant changes of the past two years.” It is a tremendous honour and privilege to address you as the newly elected President of our esteemed Institute. I would like to express my heartfelt gratitude to each and every one of you, as well as the Council, for placing your trust in me. Together, we embark on an exciting journey into the future, marking a new era for our Institute following the momentous 50th anniversary and significant changes of the past two years. As we enter this new chapter, we are committed to charting a strategic path forward. In February, the Council and the Institute’s management will convene for a Strategy Day, where we will collectively determine actionable goals for 2024 and beyond. Our aim is to drive meaningful progress and innovation, ensuring our Institute is in the best position to empower and elevate the profession. To achieve these objectives, we have identified three essential focus areas: member support and engagement; nurturing the next generation of accountants; and branding and communication. I encourage each and every one of you to read my interview in this issue, where I share my thoughts on the Institute’s value to our members and my expectations for the year ahead. The Institute remains dedicated to serving the profession. Recently, we conducted two crucial surveys – one focused on talent shortage and the other on the adoption of technology by small- and medium-sized practices. These surveys provide invaluable insights to understand and address the evolving needs of the profession, enabling us to advocate for its betterment and the broader Hong Kong society. In line with our thought leadership, I had the privilege of presenting the Institute’s budget proposals for the 2024-25 fiscal year to the media in January. As President, it was an honour to represent the Institute and provide invaluable advice to decision-makers in shaping policy for growth, innovation, and sustainable development. We also recognize the importance of serving our members’ well-being beyond the professional realm. In January, our teams showcased their immense talents, achieving notable success in the badminton and table tennis competitions of the RSCP Tournaments 2024. Additionally, I had the pleasure of attending the CPA Singing Contest, where our remarkable members left us in awe with their singing prowess. There are many more exciting moments like these to come, and I look forward to sharing them with you. Lastly, I extend my warmest Chinese New Year blessings to all, wishing you a year filled with prosperity, good health, and joy. Together, let us seize the opportunities that lie before us and make 2024 a transformative year for our Institute and our profession.
CONTENTS Issue 01 Volume 20 January 2024 NEWS 01 President’s message 04 Institute news 07 Business news FEATURES 08 A purpose-driven profession: Interview with Roy Leung The President of the Institute on tackling the talent shortage issue, and the significance of the Institute’s role as a statutory sustainability standard setter 14 Good CG, good ESG: Winners of the Best Corporate Governance and ESG Awards 2023 Key highlights based on the awardees of the Institute’s business awards which celebrate achievements in CG and ESG 20 From extraneous to essential: Charting the rise of ESG assurance in Hong Kong The status of ESG assurance in Hong Kong, and the benefits for companies of engaging a thirdparty to assure their ESG reports SHORT PROFILES 30 Q&A with a PAIB Dexter Lee, Senior Manager, Financial Planning and Analysis at Wristcheck 31 Q&A with a PAIP Joann Chan, Partner, Audit and Assurance at Crowe (HK) CPA Limited 40 Young member of the month Eddie Chan, Senior Manager at AEON Credit Service (Asia) Company Limited COLUMNS 27 Thought leadership: Andrew Harding The Chief Executive, Management Accounting, at AICPA & CIMA, on the profession’s key role in embedding sustainability into business strategy 28 Second opinions How can accountants support transition finance and planning for businesses? A look at how companies in Hong Kong are responding to the fast-moving environmental, social and governance (ESG) environment, and growing demands for ESG assurance 30 Q&A with a PAIB 31 Q&A with a PAIP 20From extraneous to essential: Charting the rise of ESG assurance in Hong Kong
DRIVING BUSINESS SUCCESS About our name A Plus stands for Accounting Plus. It represents a profession that is rich in career options, stays relevant amid rapid changes, and adds value to business. This magazine strives to present the global mindset and varied expertise of Institute members – Accountants Plus. Editor Gerry Ho Email: gerry.ho@mandl.asia Managing Editor Jemelyn Yadao Contributors Jolene Otremba, Elizabeth Utley Registered Office 2/FWang Kee Building, 252 Hennessy Road, Wanchai, Hong Kong Advertising enquiries Advertising Director Derek Tsang Email: derektsang@mandl.asia ISSN 1815-3380 President Roy Leung Vice Presidents Edward Au Stephen Law Chief Executive and Registrar Margaret W. S. Chan Director of Corporate Communications Rebecca Tam Publication Manager Michael Wong Editorial Coordinator Maggie Tam Office Address 37/F, Wu Chung House, 213 Queen’s Road East, Wanchai, Hong Kong Tel: (852) 2287-7228 Fax: (852) 2865-6603 Member and Student Services Counter 27/F, Wu Chung House, 213 Queen’s Road East, Wanchai, Hong Kong Website: www.hkicpa.org.hk Email: hkicpa@hkicpa.org.hk 42 Institute insights: Empowering SMPs in their digital transformation journey Key insights from the Institute’s study on the current state of technology adoption by small- and medium-sized practices in Hong Kong SOURCE 32 What’s next for the ISSB work plan? A n overview of the Institute’s response to the ISSB Request for Information on Consultation on Agenda Priorities 33 A review of the revenue recognition requirements A summary of the Institute’s response to the IASB Request for Information on IFRS 15 Revenue from Contracts with Customers 34 Goodbye IAS 1; Hello IFRS 18 A new standard on presentation and disclosure in financial statements 40Young member of the month A Plus is the official magazine of the Hong Kong Institute of Certified Public Accountants. The Institute retains copyright in all material published in the magazine. No part of this magazine may be reproduced without the permission of the Institute. The views expressed in the magazine are not necessarily shared by the Institute or the publisher. The Institute, the publisher and authors accept no responsibilities for loss resulting from any person acting, or refraining from acting, because of views expressed or advertisements appearing in the magazine. ©Hong Kong Institute of Certified Public Accountants January 2024. The digital version is distributed to all 48,087 members, 12,642 students of the Institute and 2,183 business stakeholders every quarterly. 14Good CG, good ESG Winners of the Best Corporate Governance and ESG Awards 2023 on the rise of ESG reporting by Hong Kong-listed Mainland enterprises, and achieving high standards in both corporate governance and ESG 36 ISSB standards: How SMEs can get ready for the upcoming requirements K ey considerations for smaller enterprises amid companies gearing up for the ISSB standards 38 Technical news
Leung Sze Kit, Roy was elected the Institute’s President for the 2023/24 Council, following the 51st annual general meeting (AGM) held on 7 December 2023, and Au Chun Hing, Edward and Law Cheuk Kin, Stephen, JP as Vice-Presidents. Leung, Partner and Head of Public Affairs, Hong Kong of KPMG, has served on the Council since 2018. Vice-President Au served on the Council from 2019 to 2020 before returning and served as Vice-President in 2022, while Vice-President Law served on the Council from 2010 to 2017 before returning in 2022. In the Council election, 14 Council members were elected and they will serve for a term of two years. The terms of office of the President and Vice-Presidents are one year respectively. The Immediate Past President will hold office as a member of the Council until the conclusion of the 52th AGM. Elected members • Leung Sze Kit, Roy (President) • Au Chun Hing, Edward (VicePresident) • Law Cheuk Kin, Stephen, JP (Vice-President) • Chan Ting Bond, Michael • Lam Siu Fung, Frank • Lee Shun Yi, Jasmine • Li Shun Fai, Michael • Liu Kwok Tai, Teddy • Lo Charbon • Tong Piu, Barry • Tse Hoi Fat, Calvin • Wong Wai Kei, Vicky • Wu Chun Sing, Parco • Yeung Long Yan Immediate Past President • Fong Wan Huen, Loretta Government-appointed lay members • Au King Lun, MH, PhD • Choi Heung Kwan, Agnes, MH • Ho Shuk Ying, Sabrina • Ng Choi Yuk, Theresa, JP Ex-officio members • Tang Helen, JP • Cheung Sau Lan, Susanna, JP Read the press release for details. The minutes from the Institute’s 51st AGM are now available for members to read. Institute announces tax policy and proposals for 2024-25 Budget Under the theme “Reinvigorate and Reinvent Hong Kong,” the Institute put forward proposals for the government’s 2024-25 budget under four key themes covering stimulating investment; attracting and retaining talent and fostering innovation; supporting the wellbeing of the community and promoting sustainability; as well as reforming the tax system. These are aimed at retaining Hong Kong’s vibrancy and attractiveness to investors and talents, as well as re-energizing its status as a leading international financial centre. A press briefing was held on 23 January to announce the proposals. Best Corporate Governance and ESG Awards 2023 The results for the Best Corporate Governance and ESGAwards 2023 were announced last November. The event saw a record number of 34 awardees in the 24th edition of the awards. This includes 12 Most Sustainable Companies/Organizations Award winners, which remains the top accolades in the competition. Separate corporate governance (CG) and environmental, social and governance (ESG) awards were also awarded to companies and public sector organizations that achieved a high standard of performance in either CG or ESG. The awards reflected that it is still unusual to find assurance of data in sustainability or ESG reports, which is consistent with the findings of the Institute’s recent study, ESG Assurance in Hong Kong 2023: An evolving landscape. The study, which expands on the 2021 study of the same theme, reviews the state of play of ESG NEWS Institute news Business news 4 January 2024 New Institute leadership and Council elected (From left to right) Margaret Chan, Institute Chief Executive and Registrar; Edward Au, Vice-President; Roy Leung, President; and Stephen Law, Vice-President.
APLUS Disciplinary findings Chan Wai Ping CPA Complaint: Failure or neglect to observe, maintain or otherwise apply the fundamental principle of professional competence and due care in sections 100.5(c) and 130 of the Code of Ethics for Professional Accountants (Code); Hong Kong Standard on Quality Control (HKSQC) 1 QualityControl for Firms that PerformAudits andReviews of Financial Statements, andOther Assurance andRelatedServices Engagements; Hong Kong Standard on Auditing (HKSA) 220 QualityControl for an Audit of Financial Statements; HKSA 230 Audit Documentation; HKSA 240 TheAuditor’s Responsibilities Relating to Fraud in anAudit of Financial Statements; HKSA 315 Identifying andAssessing theRisks ofMaterial Misstatement through assurance in the local market and makes key recommendations based on the results. Studies look at talent shortage, SMP tech adoption The Institute conducted the Survey on shortage of accounting professionals in Hong Kong to gain insights from members into the current state of talent supply within the accounting profession in Hong Kong. The Institute proposes several recommendations based on the findings of the survey, including the inclusion of the accounting profession in the Talent List; expanding the scope of the Immigration Arrangements for Nonlocal Graduates to cover the Institute’s accredited programmes in the Greater Bay Area; and subsidizing the study of the Institute’s Qualification Programme (QP). Meanwhile, with many small- and medium-sized practices (SMPs) yet to adopt technology, the Institute also launched a study to offer a roadmap for SMPs seeking to navigate digital transformation. The Institute conducted a series of interviews with SMPs and technology vendors as part of the study. The findings shed light on the inherent challenges in digital transformation that SMPs face, such as costs and the need for training and development. It also highlights the potential benefits, and offers strategic insights to gain a competitive edge while overcoming risks. 50th Anniversary Gala Dinner Over 500 guests and members were in attendance at the 50th Anniversary Gala Dinner held on 4 December 2023. Under the theme “Accounting for Success Now and Beyond,” the occasion was a joyous celebration of our achievements over the past half century, as well as the Institute’s continued efforts to facilitate the profession’s continued role as mainstays of Hong Kong’s development. Hong Kong Chief Executive John Lee was the guest of honour. A special ceremony was also held to honour the Institute’s first cohort of members. Annual report 2023 published Coinciding with the 50th anniversary of the Institute, the Annual Report 2023’s theme, “Accounting for Success Now and Beyond,” encapsulates the Institute’s dedication to not only achieving success with the profession in the present, but also embracing the future with resilience and vision. The report includes a glimpse at some of the Institute’s most significant milestones, charting our path so far and taking stock of the magnificent legacy left by those before us. Each chapter includes a photo collage that reflects the rich and dynamic history of the Institute and the profession in their interactions within and with the broader society. Recap of 2023 student engagement activities and initiatives for 2024 To kickstart the new year, the Institute reflected on the remarkable student engagement activities organized in 2023, including QP talks; business case competition; career building workshops and seminars; employer engagement; and the digitalization of QP. Events planned for 2024 and beyond include: expanded outreach with secondary schools; strengthened collaborative partnerships with universities, professional organizations, and industry leaders; and exploring development of the Interim Qualification. More details can be found here. For employers, this toolkit will help clarify misconceptions and emphasize the indispensability and impact of the profession, and the long-term value of the QP. Council meeting minutes The abridged minutes from the October, November and December 2023 Council meetings are now available. The Institute’s 50th Anniversary Gala Dinner, which took place in the Convention Hall of the Hong Kong Convention and Exhibition Centre on 4 December 2023. January 2024 5
APLUS Understanding the Entity and Its Environment; HKSA 320 Materiality in Planning and Performing anAudit; HKSA 330 The Auditor’s Responses to Assessed Risks; and HKSA 500 Audit Evidence; and being guilty of dishonourablemisconduct. As the sole practising director of a corporate practice, Chan Wai Ping &Co. Limited (practice), Chan was responsible for operating the practice, including its compliance with relevant laws and regulations, as well as for the practice’s quality control systemand the quality of its audit engagements. The practice was subject to a first-time practice review inMarch 2016 and a follow-up practice reviewwhich was concluded in June 2019 (review). During the review, the practice review team (reviewer) found that the practice had amended the audit working papers pertaining to a client’s audit. The reviewer also noted that the practice did not adopt audit programmes in a number of audit engagements, and the practice did not have adequate policies and procedures to address potential threats to auditor’s independence caused by its provision of accounting services to certain audit clients. Further, the reviewer identified specific deficiencies in two of the practice’s clients’ audits. The Practice ReviewCommittee (PRC) decided to raise a complaint against Chan. In communicating with Chan/the practice during the course of handling the complaint, the Institute found that the practice had failed to notify the Registrar of a change in the address of its registered office in accordance with the pre-amended Professional Accountants Ordinance (Cap. 50). Alternatively, Chan intentionally or recklessly failed to cooperate with the Institute pertaining to the handling of the subject PRC complaint. This indicates improper conduct on the part of Chan. Decisions and reasons: The Disciplinary Committee found that Chan had been guilty of dishonourable conduct. The committee reprimanded Chan and ordered that the name of Chan be removed from the register of CPAs for two years and her practising certificate be cancelled and not to be issued to her for a period of 24months with effect from22 November 2023. Chan was ordered to pay the costs of the disciplinary proceedings of HK$101,446. Cheung Chun Wing CPA Complaint: Failure or neglected to observe, maintain or otherwise apply the fundamental principle of integrity in sections R111.1 and R111.2 under Chapter A of the Code; the fundamental principle of professional competence and due care in section R113.1 under Chapter A of the code; and HKSQC 1; and being guilty of professional misconduct. Cheung is the sole proprietor of a firm (practice). He is responsible for the practice’s quality control systemand the quality of its audit and compliance engagements. The practice was subject to a second full scope practice reviewwhich was concluded in February 2022. At the time of the practice review, the practice reported that it had engaged subcontractors to perform its audit work. In the practice review, the practice reviewer (reviewer) reviewed a number of audit engagements. Cheung was found to have provided false and/or misleading representations to the reviewer, and false answers in the 2020 practice review self-assessment questionnaire. Furthermore, the practice review site visit revealed that in response to the prospect of practice review, Cheung had created audit evidence and working papers of the engagements for two clients subsequent to the completion of those audits. In addition, Cheung hadmanipulated the client lists provided to the reviewer in an attempt to keep the engagements with no working papers frombeing selected for practice review. The reviewer further found that for most of the practice’s engagements, little or no audit work had been done prior to issuing the audit reports such that there was not in existence any audit working paper or audit file. The reviewer also found a number of significant deficiencies in the practice’s quality control systemand performance of the reviewed engagements. Decisions and reasons: The Disciplinary Committee found that Cheung had been guilty of professional misconduct. The committee reprimanded Cheung and ordered that the name of Cheung be removed from the register of CPAs for four years and his practising certificate be cancelled with effect from19 December 2023. He was ordered to pay a penalty of HK$100,000 and the costs of the disciplinary proceedings of HK$62,678. Tan Ziwei; Wong Ka Man; Poon Chun Wa; Choi Hiu Wa; and Leung Ho Lam Complaint: Failure or neglect to observe, maintain or otherwise apply the fundamental principle of integrity under sections 110.1 A1(a) of the Code; and being guilty of misconduct. Tan, Wong, Poon, Choi and Leung are students registered under the Professional Accountants By-laws (Cap. 50A). They were found to have committed plagiarismby submitting identical (or in one case, nearly identical) work for a written assignment of the Lawmodule of the conversion programme run by their former employer, a CPA firm. The CPA firm reported the case to the Institute. After considering the information available, the Institute lodged complaints against themunder by-law34(1). Decisions and reasons: The Student Disciplinary Committee was of the view that honesty and integrity are indeed the very pillars essential to upholding the standards of the accounting profession, and the very nature of an accountant’s workmust be arrived at independently. The committee found that Tan, Wong, Poon, Choi and Leung had been guilty of misconduct. The committee reprimanded them and ordered that they be declared not eligible to sit for any examination of the Institute for a period of two years with effect from14 December 2023. They were ordered to pay costs of the disciplinary proceedings of HK$15,375 severally. Details of the disciplinary findings are available on the Institute’s website. 6 January 2024
NEWS Business US$20 million The total amount in penalties issued by the U.S.’s PCAOB in 2023, almost doubling its record set in 2022. The regulator that oversees the audits of U.S.-listed companies has stepped up enforcement actions against the Big Four and other firms including ones based in Mainland China and Hong Kong. China Evergrande Group, the Hong Kong-listed property company, was ordered by a Hong Kong court to liquidate this month. With more than US$300 billion in liabilities, it is the world’s most indebted developer. Judge Linda Chan delivered the ruling after the company failed to convince the court it had a viable restructuring plan after a 18-month long hearing. Alvarez &Marsal were appointed by the court as the liquidator of the company. January 2024 7 29 The number of FTSE 100 businesses that changed their chief financial officer in 2023, the most since at least 2013. Meanwhile, CFO turnover remained high at 17 percent across big European markets and the S&P 500, according to research by leadership advisory firmRussell Reynolds. The Financial Times reported that some of last year’s turnover was due to a rising enthusiasm for promoting CFOs to chief executive or chief operating officer in preparation for the CEO role. US$7 million The percentage of Hong Kong-listed companies that have voluntarily sought external assurance on ESG reporting, according to the Institute’s survey of 1,882 respondents. This is an increase from 4.5 percent when a similar survey was carried out two year earlier in 2021. Read more about the findings of the report and the evolving field of ESG assurance here. The amount that PwC Hong Kong and PwC China agreed to pay the U.S.’s Public Company Accounting Oversight Board (PCAOB) in a settlement over claims that more than 1,000 of the firms’ employees cheated in online exams on U.S. accounting standards between 2018 and 2020. The regulator said the firms “failed to detect or prevent extensive, improper answer sharing.” The firms agreed to the settlement, without admitting or denying the claims. The percentage decrease in the number of graduates earning an accounting bachelor’s degree in the 2021 to 2022 academic year in the United States, according to the American Institute of CPAs. It marks another sharp drop after a decline of 2.8 percent a year before. The U.S., like many countries, is facing a shortage of young people joining the accounting profession. 7.8% APLUS 7.5% What the Hong Kong Institute of CPAs estimates Hong Kong’s fiscal deficit will be in 2023/24 financial year, due to falling land sales, weaker economic growth and lower stamp duty income from the stock and property markets. The Institute predicts the government will have reserves of about HK$707 billion by the end of March, the equivalent of 11 months’ worth of expenditure. HK$127.3 billion 20,000 The shortage of skilled accounting professionals in South Africa according to the South African Institute of Chartered Accountants (SAICA). According to the country’s accounting body, from 2021 to 2022 there was a decline of 24 percent in the number of candidates taking the Initial Test of Competence, the first of two SAICA qualifying examinations. HK$100 billion What KPMG forecasts Hong Kong IPO proceeds to reach in 2024, from an estimated 90 new listings. This would mark a recovery from 2023, a year in which HK$46.3 billion was raised through 70 IPOs. The firm cited listing reforms that would pave the way for specialist technology companies and smaller companies from the Greater Bay Area to raise funds on Hong Kong’s stock market.
PROFILE Roy Leung After years serving on the Council and listening to the different perspectives of members, Roy Leung, the Institute’s newly elected President, tells Jemelyn Yadao how he is ready to put a spotlight on the value accountants create and diverse roles they can play Accountants regularly make a positive impact across different sectors. The benefits to society as a whole can be subtle to the casual observer, and to some members of the professions, the sense of purpose that comes with the work uncovers itself over time. But for Roy Leung, the new President of the Hong Kong Institute of CPAs, accounting as a pathway to a meaningful career was immediately clear. “The purpose attracted me,” says Leung. “It might not be very obvious, but the fact is the profession has contributed a lot to enhancing Hong Kong as an international financial centre. With high quality reporting, you help direct relevant resources to the best performing businesses. You help investors identify the best businesses to invest in, and for those businesses that have the potential, they have the opportunity to further their journey and succeed.” Bringing the accounting profession’s deeper purpose and value to the wider public consciousness – as well as to CPAs themselves – is hugely important to Leung, and ties in with what he says are the Institute’s current three focus areas: member support and engagement; nurturing the next generation of accountants; and branding and communication. With the first year since the further regulatory reform of the profession, and the Institute’s 50th anniversary celebrations having just concluded, Leung says it is now the perfect time to cement the Institute’s redefined role and ramp up efforts around those three themes. “In the past two years, we had great leadership by the A PURPOSE- Interview with Roy Leung, President of HKICPA DRIVEN PROFESSION: 8 January 2024
APLUS January 2024 9
PROFILE Roy Leung Immediate Past President, Loretta Fong, during a difficult period – the fight against COVID-19, the disruptions to both the Institute’s activities and our members’ day-today business. Significant time was also spent facilitating the transition of the Institute’s regulatory functions. With all of that being history, it’s a great opportunity for us to reinforce a mindset change towards focusing more on members,” he says. Leung, Partner and Head of Public Affairs, Hong Kong at KPMG, has served on the Institute’s Council since 2018. He says he is keen to make use of the experience he gained from those six years to lead the Institute in continuing to develop the accounting profession of Hong Kong. Leung also stresses the point that it’s not just about him. “It is the Institute management and the whole Council. I’ve been in this role for about a month, but I can already feel the very strong support of our Council members. They have a lot of drive to join in on the different activities, and that gives me a lot of encouragement and empowerment.” Talent first Amuch-discussed issue troubling the Institute is the shortage of staff within the profession in Hong Kong. Leung brings up one statistic – that 62 percent of professional accountants in practice, or PAIPs, indicate junior level job positions as the most difficult to recruit, according to the Institute’s recent survey. “It just tells you how important it is for us to, first of all, attract young talent to join the profession and, secondly, to retain them. This is obviously a very important role of the Institute,” he says. To take a closer look at the talent supply within the Hong Kong profession and explore potential solutions to attract talent, the Institute conducted a members’ survey from late November to early December 2023. Based on the findings, the Institute came up with several proposals to address the talent shortage, which will be brought to the government, Leung says. “We’ll also be sharing with our members the ways in which the Institute is trying to help them overcome this challenge,” he adds. The Institute is advocating for three measures: including the accounting profession in the government’s “Talent List”; initiatives to attract more talents from the Greater Bay Area; and subsidies for Mainland China students pursuing the Institute’s Qualification Programme. Leung says that while these initiatives will help speed up the process of filling vacancies, other initiatives set up by the Institute are taking place which are more long-term and emphasize communication. An example is the Experiential Business Learning Programme, which Leung initiated as Vice President two years ago. The programme offers training as well as internships with small- and medium-sized practices (SMPs) to university students in Hong Kong. “It’s really about enhancing communications with students and universities,” he says. “I was pleased to receive very good feedback from both the students and the employers. We managed to recruit close to 100 people last year for our SMPs,” Leung recalls. Students are not just taught about audit and accounting but also hear directly from Institute members working in different areas of the profession about the value of what they do, Leung explains. “We’ll be doing more of these. We have started similar activities with secondary school students because we would like to have high quality secondary school students who are thinking about their future careers to at least knowwhat accounting is,” he says. “It’s still not very clear to the general public what accountants do in addition to accounting and auditing. All of these activities aim to showcase that it’s not just about numbers. It’s about businesses, technology, communication, and more.” While attracting talent is one aspect, retaining talent is another. To Leung, the “purpose” and meaning of the job is important to the younger generation, and this must be acknowledged by recruiters and the profession as a whole. “This reiterates the importance of showcasing our value, for example in the areas of environmental, social and governance (ESG) and sustainability, through the Institute’s branding and communication,” he says. Leung thinks more focus should also go into bolstering the Institute’s network of young members, with more enticing activities and services. “Cross-professional activities are most welcomed by our members. They treasure the opportunity to mingle and to expand their network outside the profession.” Enhancing communication between younger members and more experienced members could also be beneficial, he notes. “We’ve always had our Mentorship Programme, but I think we could explore more opportunities and ideas. For example, would career planning activities be appealing for younger members?” With the Institute having 18,776 young members, as of 15 January, accounting for 39 percent of the overall membership, Leung wants to see more work being done around engaging with this member segment. “Young members are a really important asset to the “ I can already feel the very strong support of our Council members. They have a lot of drive to join in on the different activities, and that gives me a lot of encouragement and empowerment.” 10 January 2024
APLUS Roy Leung, Partner and Head of Public Affairs, Hong Kong at KPMG, has extensive experience in providing assurance and advisory services to companies seeking initial public offerings. He is also the lead audit engagement partner for listed companies in sectors including transportation, real estate and consumer markets. January 2024 11
PROFILE Roy Leung profession. One thing which I have always thought about is, ‘How can we make sure we have our young members participate in most of our events?’ Young members make up a big proportion of membership. We should be thinking about whether there is enough participation by young members in activities. If not, why not, and howwe can enhance that going forward.” Sustainable outlook While, naturally, accountants talk about ESG and sustainability predominantly in terms of reporting, audit and assurance, Leung emphasizes that there is much more to it than simply those things, and therefore many opportunities for accountants to play a key role. “It’s really about the longterm plan for an organization to achieve ESG goals and to remain sustainable. With that you have the ESG or sustainability strategy setting, and the company would have to monitor adherence to the plan, and identify and manage risks from an ESG perspective. So it’s not just reporting, it’s about the whole ESG journey, and if you look at the role of an accountant, we are already involved in every part of it – we have accountants acting as business advisors or involved in the strategic direction of a board,” says Leung. “With that, there’s a lot of opportunity for our members.” Helping members seize these opportunities for development is a priority for the Institute, especially as it is pressing on with its role as Hong Kong’s statutory sustainability standard setter. It will not just be setting sustainability and climate disclosures for the city, says Leung. “Our role will also be about communicating with our members and the general public what those standards mean. And then as part of a standard setting protocol, we do have to engage with both the users and also the preparers of the information,” he says. Leung also points out that the Institute has been and will continue developing initiatives for building members’ capacity, and part of that are the various As part of his new role, Leung is focused on building activities around three areas: member support and engagement; nurturing the next generation of accountants; and branding and communication. 12 January 2024
APLUS According to findings from the Institute’s recent survey on talent supply in the accounting profession, 61 percent of the respondents ranked the extent of talent shortage impact at 7 or above (where 1 represents no impact and 10 indicates severe adverse effects), with 25 percent of them indicating a rating of 9 or above. continuing professional development programmes, which have covered the latest topics related to ESG and sustainability. Another way the Institute can help members capture the opportunities is by creating ways for members to connect with businesses, says Leung. “We could collaborate with other professional bodies or business chambers on an event or a professional development programme on sustainability or ESG reporting, to promote why accountants are most suited to help with a company’s ESG journey.” Evolving skills Having been chairman of the Institute’s Professional Development Committee (PDC) in the last two years, Leung has a good idea of what it takes to be a good accountant today. “Compared to my time as a young accountant, the skill sets required of our members are now more diverse. To be a good accountant, you have to have good skills in technology, and in ESG and sustainability. So with my experience as chairman of the PDC and current role as President, I think a lot of focus has to be on these emerging themes when driving members’ development,” he says. To provide better support for members when it comes to technology, the Institute recently conducted research on technology adoption among SMPs. Leung says it was important to understand the current state of play, and the challenges faced by the profession, in order to see the different roles the Institute can play. One key role is as an advocator for the betterment of the profession, says Leung. “As set out in our report, we advocate for additional funding from government to support SMPs to further their journey in digital transformation.” On the training and member development side, Leung recognizes that the Institute has done a significant amount of work building up awareness, by organizing training and seminars on a range of key topics such as cryptocurrencies, blockchain and artificial intelligence. He now wants to move on to the next level. “Going forward, we’d like to focus on having more use-cases for members. What does a particular piece of technology development mean to our members? And how can they make use of technology in their own business to improve efficiency?” Valuing feedback Leung reminisces about the time he was first elected as a Council member in December 2017. While he had a clear understanding of the role and responsibilities, he never imagined he would gain so much. “Honestly speaking, if I look back at the past six years, I learned a lot more than I expected. As a Council member, and now as President, you get to see how the different segments of our membership think about a particular issue or a particular piece of communication from the Institute. You get to learn about the different needs and perspectives of the different areas of the profession. So it gives you a broader view of what something means to the society at large.” Members return to his mind when asked about his most fulfilling career moments. “Moments when members share good feedback, for example when they came up to me and said they really treasured the Experiential Business Learning Programme, are really fulfilling for me, knowing that I was able to help them.” Leung also values opportunities to speak to members, and has been a speaker at seminars for numerous years. “For me, it’s not just about sharing accounting knowledge. It’s also good hearing the questions raised by members as this allows you to understand what their challenges are. It could be the lack of staff or lack of technical knowledge. Then you can bring this to the Institute and Council and see howwe can help support our members.” Leung says the Institute will do more to enhance engagement with members and to encourage members’ participation in Institute events and affairs. With Leung’s schedule often packed with both Institute and firm-related meetings, he is often thinking about how to strike a balance between work and being a present parent. Leung, dad to an 11-year-old boy, prioritizes spending any free time he has with family. He particularly loves playing badminton with his son. “I like to really plan out my time, even if it means reorganizing my schedule and spreading things out. Having your Monday or Friday lunches full of appointments isn’t too difficult, and this allows me to reserve some time for family,” he says. Leung admits that he hasn’t yet pushed the idea of an accounting career to his son, believing it to be pointless. “What a CPA would look like 10 years from now is probably something I can’t imagine right now. But I do try to make sure that he’s well equipped with the skill sets needed to play a significant role in the future environment. And then it will be up to him. But obviously, out of my self-interest, I would very much like him to be an accountant.” “ It’s not just reporting, it’s about the whole ESG journey, and if you look at the role of an accountant, we are already involved in every part of it – we have accountants acting as business advisors or involved in the strategic direction of a board.” 61% January 2024 13
BCG & ESG Award winners GOOD CG, – Quote by Loretta Fong, Institute Immediate Past President and Chairman of the Judging Panel of the Best Corporate Governance and ESGAwards, following the announcement of the winners of the 24th edition of the Institute’s business awards. G “ARE TWO THEM BOTH THE SAME COIN, IS WHY 14 January 2024
APLUS , The 24th edition of the Institute’s prestigious business awards highlighted that corporate governance standards seemed to have plateaued, and clear improvements in the ESG reporting of Mainland enterprises. Winners share the factors of their success with Jolene Otremba. In a momentous celebration of its 50th anniversary last year, the Hong Kong Institute of Certified Public Accountants concluded the Best Corporate Governance and ESGAwards 2023 in November 2023 with a record-breaking number of winners. Thirty-four organizations were recognized for their outstanding corporate governance (CG) and environmental, social and governance (ESG) performance. Supported by the Hong Kong government, financial market regulators, investor groups and the business community, the awards set benchmarks for best practices in CG and ESG, fostering transparency, accountability and stakeholder engagement. According to Salina Yan, Permanent Secretary for Financial Services and the Treasury (Financial Services), who was guest of honour at the 2023 awards presentation ceremony, the awards are significant and in an address to the winners and other guests, she said: “You have demonstrated clearly that doing good to society and the environment also means doing good for your businesses. From a big picture point of view, concerted efforts by individual organizations to attain a high level of governance can also help foster the credibility and resilience of our financial markets to weather changes and challenges.” The awards are focused on the voluntary adoption of practices and disclosures that surpass the minimum legal requirement. While the evaluation centres on information disclosed in annual and sustainability reports, the judging panel also takes into consideration other public information GOOD ESG SIDES OF H” , WW E H S IC T HRESS January 2024 15
BCG & ESG Award winners that provides insights into how companies and organizations are managed in practice. “We are pleased to see more very strong performances in 2023 and a number of newwinners emerging, particularly in the separate ESG section of the awards,” says Loretta Fong, the Institute’s Immediate Past President, who was President at the time of the 2023 awards and Chairman of the Judging Panel. The rise of ESG reporting on the Mainland The Institute noted that there is clear improvement in the ESG reporting of Mainland enterprises listed in Hong Kong and more companies that are establishing connections between their ESG vision, strategies and action plans. Most notably was an increase in the disclosure of quantitative environmental key performance indicators (KPIs), as well as a growing integration of ESG-related risks into risk management frameworks. The Institute also noted that a driving force could be the Hong Kong government’s emphasis on achieving carbon neutrality by 2050, and the Mainland government’s 2060 target which is putting mounting pressure on institutional investors to prioritize sustainable developments. And many agree. CK Poon, Head of ESG at Geely Automobile Holdings Limited, which received a special mention in the 2023 Awards’ H-share Companies and Other Mainland Enterprises Category of the ESGAwards, believes that government initiatives and public awareness around ESG issues have been firing up companies in the Mainland to improve ESG reporting practices. “The Chinese government’s double carbon targets improved the public awareness on ESG issues such as climate change,” he explains. “The stock exchanges in the Mainland have also been actively promoting and will introduce guidelines/ regulations in ESG reporting.” And many see this as a welcoming move. According to Cerin Yip, ESGDirector at Alibaba Group Holding Limited, which also received a special mention for the ESGAwards in the same category, says: “Alibaba’s mission is ‘To Make it Easy to Do Business Anywhere’. The design of our ESG foundation is critical to the realization of mission and strategy. ” To fulfil this mission, since April 2021, the e-commerce company has organized its ESGmaterial issues into seven long-term strategic directions based on its capabilities and priorities. These align with the United Nations’ 17 Sustainable Development Goals and China’s key development policy initiatives. And this is something that Poon has observed among Mainland companies today. “I started to observe some ESG reports of Mainland enterprises that mention more ESG reporting standards such as Task Force on Climaterelated Financial Disclosures or Sustainability Accounting Standards Board standards besides the typical Global Reporting Initiative, with more emphasis on environmental issues rather than social issues,” he says. This gives comfort to investors, stakeholders and the wider business community, and shows how well enterprises are prepared for managing their ESG-related risks and opportunities. According to JD Logistics, which also received a special mention in the ESGAwards in the same category, an increased focus on ESG reporting has multiple positive effects, including boosting a company’s public image, ensuring compliance, access to capital, investor attraction and retention, competitive advantage and even risk mitigation. “ESG reporting is not just a compliance requirement, it has become a strategic imperative for Mainland enterprises to thrive in a global business environment that values sustainability and responsible business practices,” says Dong Wang, Director of Public Affairs Department of JD Logistics. While many Mainland enterprises have jumped on the ESG bandwagon, some confess that they “ The tone from the top helped us greatly in the further implementation of ESG improvements.” CK Poon, Head of ESG at Geely Automobile Holdings Limited 16 January 2024
APLUS are still at a relatively young stage compared to their global peers. However, some have also adopted a clear vision and mission, adopting a top-down approach and a strong governance structure to help them pave the way forward. “A strong and effective ESG governance structure is key to ensuring that the ESG issues Alibaba faces are incorporated into the corporate agenda,” says Yip at Alibaba Group. “And the tone from the top helped us greatly in the further implementation of ESG improvements,” adds Geely’s Poon. And they aren’t just speaking on their organizations’ approaches, but also on the entire industry. To bolster this point, Eddie Yue, Chief Executive of the Hong Kong Monetary Authority (HKMA), says that institutions, governments and regulators also need to take the lead. “Within our organization, we have actively incorporated sustainability considerations into our internal operations with our aspirations structuring around the three pillars of environment, people and social responsibility,” he explains. HKMA won an ESGAward for the Public Sector/Not-for-profit Organizations (Large) Category. With the introduction of multiple ESG initiatives and the oversight of its Green and Sustainability Steering Committee, the HKMA has made a number of achievements. A notable one being a double-digit reduction on a per-capita basis across greenhouse gas emissions, total energy consumption and total paper consumption in 2022, compared to 2015 when it first started tracking carbon footprint. “As the central banking institution of Hong Kong, we recognize the need to lead by example, and our responsibility to guide the banking industry to strengthen their climate-resilience, power them for the transition, as well as promote the healthy growth of a sustainable finance ecosystem,” Yue says. But he also admits that there may be challenges for companies to adopt effective ESG practices along the way. Both the HKMA and many of Mainland companies cite similar challenges faced by the industry in general. These include a lack of data and common standards for sustainability reporting, insufficient talent to handle the technical work, or businesses that are spread across many regions which makes ESG reporting particularly difficult. Yet despite these challenges, the awardees agree that enterprises now are more motivated than ever to monitor, measure, assess and manage ESG performance by identifying areas for improvement, benchmarking global best practices, setting metrics and targets, and tracking and managing the process. JD Logistics believes that moving forward, Mainland enterprises can take several steps to advance their ESG reporting practices. These include integrating ESG considerations into the overall business strategy, advanced technology adoption, supply chain transparency, education and training, and innovating for sustainable solutions. But Wang also advises these companies to aim high. “Mainland enterprises can “ A strong and effective ESG governance structure is key to ensuring that the ESG issues Alibaba faces are incorporated into the corporate agenda.” “ ESG reporting... has become a strategic imperative for Mainland enterprises to thrive in a global business environment that values sustainability and responsible business practices.” Dong Wang, Director of Public Affairs Department of JD Logistics Cerin Yip, ESG Director at Alibaba Group Holding Limited January 2024 17
BCG & ESG Award winners not only meet current ESG reporting expectations, but also position themselves as leaders in sustainability, contributing positively to environmental and social goals,” he says. For the HKMA, for example, they, together with fellow regulators, have launched a data repository, which contains various government data sources relevant to the assessment of physical risks in Hong Kong. They are also planning to launch a cloud-based platform for physical risk assessment to facilitate banks’ assessment of the impact of physical risk on residential and commercial buildings in Hong Kong under different climate scenarios. Meanwhile, the Hong Kong Exchanges and Clearing (HKEX) which received a special mention under theMost Sustainable Companies/Organizations (MSCO) Awards (Hang Seng Index Category), has set itself new targets including achieving group carbon neutrality by 2024 and net zero by 2040. “As a frontline market regulator, we are committed to promoting high CG standards among our issuers, helping to elevate the Hong Kong securities market’s quality and attractiveness. We will be implementing enhanced climaterelated disclosure requirements following the International Sustainability Standards Board’s IFRS Sustainability Disclosure Standards,” says a HKEX spokesperson. But for now, as companies forge ahead in this space and tackle their challenges, they agree on one thing: internal buy-in and collaboration will be key. These could include international and regional discussions, stakeholder engagement and company-wide support and coordination. “We need less PR content talking about the good side and more on illustrating how the company handles ESG risks and opportunities,” Geely’s Poon says. Keeping sight of CG While the awards celebrated the countless achievements and progress that has been made in ESG reporting, ominously, Hong Kong’s progress and development in CG has been lagging, reflecting Asian Corporate Governance Association’s latest CG rankings in Asia Pacific. Its research showed that Japan shot to second place overtaking Hong Kong, which fell from its second-place position to sixth place. This finding was also apparent in the 2023 Awards. While Fong attributed this trend to the additional time and resources directed toward developing sustainability practices and reporting, nonetheless, she emphasized the inseparable relationship between CG and ESG performance, urging companies to continue prioritizing things like board diversity, independence and other CG best practices. “Good CG underpins everything that a business does, so it is important to have the right governance structures in place, as well as high standards of ESG to ensure long-term sustainability of the business,” she explains. Johnson Kong, a panel judge of the 2023 Awards and Vice President and member of BlackRock’s Investment Stewardship team, concurred. “While improvements were noticed, such as board refreshment and climate targetsetting becoming more common, some potential key enhancements remain yet to be realized over the years,” he says. These issues range from independent board leadership and nomination processes to “ Investors would benefit from boards and management focusing on achieving meaningful approaches that align with the interests of all shareholders and key stakeholders, even if it may take extra efforts to move the needle.” “ We recognize the need to lead by example, and our responsibility to guide the banking industry to strengthen their climate-resilience.” Johnson Kong, Vice President and member of BlackRock’s Investment Stewardship team Eddie Yue, Chief Executive of the Hong Kong Monetary Authority 18 January 2024
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