Corporate Governance and Climate Change Risk Management: A Case Study of Transport Industry in Hong Kong

Abstract

This paper examines corporate governance and Climate Change risk management of transport industry in Hong Kong. This exploratory case study aims to investigate how the board of directors of an organization in the transport sector is addressing Climate Change risks through governance practices. Climate Change results from continued changes in climate pattern and the increase in frequency and intensity of extreme weather, and accordingly, every organization, especially the transportation company, is affected by the potential negative impacts caused by Climate Change, i.e. climate-related risks. We examine, to what extent, corporate governance plays a significant role in addressing climate-related risks. To answer this question, we reviewed several literature streams regarding the inter-relationship between climate-related risks, governance structure, board of directors and management. We also reviewed the literature on corporate governance and related theories, and regulatory policy in Hong Kong. Based on the interdisciplinary literature review, we developed a conceptual framework of our study and then we formulate the methodology. We selected 2 largest corporations, one from aviation and another one from railway, listed in Hong Kong Stock Exchange based on the criteria set by TCFD recommendations to conduct the study through two stages: secondary sourced data from annual report, sustainability report and website of the companies and primary sourced data through interview of sustainability manager. The research results suggest that governance structure and availability of resources have significant influence on the management of climate-related risks; however, external factors such as stakeholders show relatively less significant effects in influencing on the company’s policy on Climate Change. This study contributes to corporate governance and related theories in risks assessment on Climate Change and provides a picture of updated trend, phenomenon and framework in addressing climate-related risks for all stakeholders in Hong Kong.