Abstract

The introduction of the Environmental, Social and Governance Reporting Guide (Guide) by HKEX in 2013, and the subsequent upgrade of the Guide's reporting obligation to "comply or explain" in 2016, have significantly moved the dial for Hong Kong issuers' ESG reporting. Besides, it is widely recognized that ESG risks present financial, operational, and compliance risks to listed companies. Investors are increasingly willing to allocate capital in sustainable investments that consider climate change concerns and ESG reporting of issuers, thus demanding more information on how issuers manage their ESG risks. However, current ESG reporting is confronted with many bottlenecks: (1) the ESG data are not collected in a trackable manner; (2) the ESG data delivered to ESG reporting agencies might be manipulated; (3) the reporting process is not transparent to investors, NGOs and industry associations. To address the bottlenecks, this research proposes a Blockchain-enabled ESG (BESG) Reporting platform to form the foundation for developing a total solution to upgrade the ESG reporting industry. Firstly, blockchain-based semi-automated ESG report generation approach is developed using smart contracts based on reliable ESG data. It provides a highly reliable, trackable, and transparent foundation for further ESG reporting traceability, visibility, and monitoring. Secondly, versioning smart contract-enabled sustainability assessment approach is developed using a multi-criteria decision analysis model. Its input data include the annual ESG report and real-time ESG data to achieve a complete and timely ESG performance evaluation. Thirdly, a crypto-based incentive mechanism is designed for listed companies to optimize the ESG performance using the quantitative ESG scores. Finally, relevant case studies will be carried out to verify the practicability and effectiveness of the proposed solutions, offer managerial insights, and compare the overall performance of proposed solutions with those of other strategies to illustrate the solution's superiority in this study.

Keywords: Blockchain; ESG Report; Sustainability Assessment; Smart Contract; Incentive Mechanism; Multi-criteria Decision Analysis