Abstract

This thematic research explores the optimisation of socially responsible impact alongside corporate finance decision-making within Hong Kong’s unique socio-political and regulatory environment.

As global economies increasingly prioritise sustainable finance, Hong Kong’s strategic position as a major financial hub presents opportunities and challenges in integrating socially responsible investment considerations into its corporate financing strategies.

This paper uses a triangulation research approach to examine how social policies, international frameworks, and corporate social responsibility influence financial decisions, particularly in a company’s valuation and capital budgeting decisions.

The findings reveal that while direct effects of corporate social responsibility on financing decisions may be limited, the associated socially responsible investing factors are significantly affected by corporate risk assessment or their companies’ valuation, and stock performances.

Moreover, Hong Kong-specific social values play a crucial role in shaping preferences for socially responsible investments, with implications for finance managers in tailoring financial solutions and regulatory standards in the sector.

This thematic research contributes to understanding how Hong Kong-listed companies can balance financial performance with corporate social responsibility and disclosure standards to enhance sustainable corporate growth. The study provides valuable insights for stakeholders aiming to align financial objectives with broader social impact goals in Hong Kong, as Asia’s leading financial centre.

This research article examines the integration of social value and corporate social responsibility into capital budgeting decisions among Hong Kong-listed companies, addressing whether a company’s value maximisation remains the sole criterion or if social responsibility and impact factors are equally vital.

Drawing on empirical evidence from across nine sectors, namely, transport, utilities, financial, banking, conglomerate, tech, real estate, consumer, and hotel servicing in Hong Kong, we analyse corporate social responsibility and socially responsible investment practices of listed companies. Those that submit sustainable report, the Hong Kong Exchanges and Clearing Limited’s (HKEX) 2025 ESG Reporting Code, and financial statements are studied and examined.

Our findings reveal that while conventional metrics dominate, incorporating social value enhances long-term firm value via reduced risks and stakeholder trust. Core social values such as equality, anti-discrimination, human rights protection, health and work safety, and sustainability are sector-specific yet universal.

Impactful decisions leverage integrated international frameworks like UN Sustainable Development Goals, aligned scenario analysis, yielding dual maximisation of financial and social outcomes. Policy implications for Hong Kong’s sustainable finance hub are discussed.

Keywords: Corporate finance decision, capital budgeting, social value, corporate social responsibility, socially responsible investment, firm value, Hong Kong-listed companies, and ESG integration.

1. From Profit to Purpose: The Evolution of Capital Budgeting in Hong Kong

In the evolving landscape of corporate finance, capital budgeting encompasses decisions on investments like infrastructure, technology, or R&D.  Traditionally, it prioritises metrics such as Net Present Value (NPV), Internal Rate of Return (IRR), and payback periods to maximise shareholder value.

However, amid global pressures for sustainability, Hong Kong’s financial ecosystem, governed by the HKEX, mandates ESG disclosures [1] under its 2025 Climate-Related Reporting Framework, compelling firms to weigh social impacts alongside financial returns.

This study addresses three pivotal questions in the context of  Hong Kong large-cap companies: (a) Is the firm’s value maximisation the only driver for capital finance decisions [2], or do social responsibility and impact matter? (b) What core social value must Hong Kong-listed corporates consider across key sectors? [3] (c) How can firms make impactful decisions that optimise their value and social value?

2. Beyond Shareholder Value: Theoretical Foundations of Dual Maximisation

2.1 Theoretical Foundations

Social value, as shared normative principles: equality, sustainability per SDGs, extends beyond profit maximisation [4] to stakeholder theory [5], positing that addressing societal expectations enhances resilience.

In capital budgeting, traditional models overlook externalities [6]; CSR and SRI integration, per HKEX guidelines, incorporates them via adjusted NPV, such as discounting social costs.  

Empirical evidence from Hong Kong-listed companies shows ESG disclosure positively correlates with financial performance, with a relationship: net present value after social costs plus impact premiums.

Our research on Hong Kong-listed companies across different industries affirms that CSR boosts net social value, as shown in our studies, which are based on social return on investment (SROI). 

2.2 Hong Kong Specific Context in Social Value

HKEX’s ESG Code mandates [7] “comply-or-explain” disclosures on social aspects, such as labour standards, community engagement from financial year (FY) 2025, with Task Force on Climate Related Disclosure (TCFD) aligned climate reporting mandatory for large-cap stocks.  According to PwC’s 2024 study [8] of 300 Hong Kong-listed companies, more than 80% disclosed social KPIs like supply chain management, up from 60% in 2023. Sector variations exist in that utility companies emphasise emissions, while tech companies focus on data privacy.

Key social values are also outlined in the 2025 Policy Address of the Hong Kong Chief Executive [9]. Delivered by Chief Executive (CE) John Lee Ka-chiu on September 17, 2025, the Hong Kong SAR Government emphasises a people-oriented governance approach that safeguards and promotes core social values [10-13].

These values are positioned as foundational to stability, prosperity, and well-being, with the government committing to oversee their implementation through reforms, accountability mechanisms, and multi-pronged strategies [10]. The address and its supplement highlight how these values are challenged amid complications like demographic shifts, economic pressures, technological disruptions, and security risks.

2.3 Social Values Amplified by the Hong Kong SAR

With its focus on human rights , equality is framed as a core value to eliminate discrimination and foster a harmonious, caring society, with targeted support for vulnerable groups amid challenges like ageing, ethnic minority integration, and gender disparities [10]. This aligns with human rights protections, including privacy and anti-discrimination ordinances.

With equality as one of the key social values in the CE’s policy [9], the Equal Opportunities Commission (EOC) is responsible for upholding the anti-discrimination laws and promoting education for inclusivity. The EOC’s measures include boosting support for ethnic minorities, via measures such as setting up new interpretation centres, youth networks, and Chinese language training, which are highlighted in the policy and address social value [9-11].

As for women’s empowerment, the CE’s policy announced the increase in the Women Empowerment Fund to HK$30 million annually [9].

Other social values espoused by the Hong Kong SAR as spelt out in the CE’s policy include promoting equitable access to subsidised housing. Public rental housing quotas adjusted from the Green Form: White Form ratio will be increased to 50:50 to promote equitable access, reducing waiting times to 4.5 years by 2026-27 [9].

Innovation and technological advancement are also recognised as core areas. With the policy address’s emphasis on Smart City & AI, innovation is valued as a driver of efficiency and future-proofing society. At the same time, AI is positioned to enhance public services while mitigating risks like data privacy breaches [9-13].

As CE Lee stated, “This Policy Address serves as a roadmap for Hong Kong to strive for a vibrant economy, pursue development, and improve people’s livelihood.”  The ultimate objective is “to improve people’s livelihood” amid challenges like ageing and global uncertainties [9-13].

Our research examines how corporate social responsibility (CSR) and socially responsible investment (SRI) practices in Hong Kong are contextualised by mapping them against both Hong Kong’s social norms and international standards.  This mapping serves two purposes: (i) it highlights the alignment of Hong Kong-listed firms with global frameworks such as UN Sustainable Development Goals (SDGs), International Covenant on Civil and Political Rights (ICCPR) and International Covenant on Economic, Social and Cultural Rights (ICESCR), thereby enhancing international comparability and investor confidence; and (ii) it identifies areas where local social values (equality, housing access, technological innovation) diverge, offering insights into how firms tailor their CSR strategies to Hong Kong’s socio-political context. This dual mapping strengthens the legitimacy of Hong Kong’s ESG disclosures and supports the arguments that CSR/SRI integration enhances firm resilience and valuation [14-16]

The social values outlined in Chief Executive John Lee Ka-chiu’s 2025 Policy Address—such as equality, economic prosperity, and AI/smart city innovation—draw from Hong Kong’s Basic Law, which incorporates key international human rights instruments [12] like the ICCPR [14] and the ICESCR [15], extended from the UK in 1976 and listed in Basic Law Annex III. These align with broader UN frameworks, including the Universal Declaration of Human Rights (UDHR) and the UN-SDGs [15-17].

2.4 Mapping Hong Kong’s Social Value and International Standards

Hong Kong’s Equal Opportunities Commission (EOC), through its enforcement of anti-discrimination ordinances, provides a practical domestic mechanism that operationalises international conventions such as the Universal Declaration of Human Rights (UDHR) and ICCPR.  For listed companies, this means CSR reporting must incorporate equality and inclusivity metrics, ensuring that corporate practices are not only legally compliant but also aligned with global human rights standards.  This linkage illustrates how regulatory institutions embed international norms into corporate finance decisions, reinforcing the credibility of Hong Kong’s ESG ecosystem.  [12-14]

International conventions like the International Convention on the Elimination of All Forms of Racial Discrimination [13-15] require equitable access to housing and education, as seen in CE’s policy address on public rental quotas and disability service expansions. Those social value mapping the SDG 5 (Gender Equality) and SDG 10 (Reduced Inequalities) set benchmarks for reducing disparities, with Hong Kong’s fertility incentives and child allowances advancing SDG 1 (No Poverty) by addressing intergenerational issues [15-17].

Hong Kong’s initiatives under SDG 8 (Decent Work and Economic Growth) include policies such as quota of 50,000 talent visas and IPO market enhancements. While the visas primarily attract foreign professionals, they indirectly contribute to youth employment by expanding sectors such as technology and finance, creating spill-over opportunities for local graduates.  This reflects a broader strategy where international talent inflows and capital market growth enhance domestic employment prospects. Thus, the policy does not directly “solve” youth unemployment but instead reinforces sectoral expansion, which in turn supports domestic employment prospects.   SDG 11 in mapping Hong Kong social value in sustainable cities underpins housing initiatives for 189,000 units by 2030, promoting inclusive urbanisation. Broader social values include equitable resource distribution to prevent inequality, per SDG 10 [15-17].

2.5 Broad Definition of Social Value Beyond Hong Kong

Social values are the collectively-endorsed principles that define a society’s moral identity, guide its institutions, and shape the behaviour of its members toward a common vision of the good life [21-22].

Social values are the shared beliefs, principles, and standards that a society collectively considers important, desirable, and worth upholding to guide individual behaviour, shape institutions, and maintain social order and cohesion [21-22].

They function as the moral and cultural compass of a community, influencing laws, policies, education, family structures, economic systems, and interpersonal relationships [21-22].

2.6 Social Value Versus Shareholders’ Value

While social values are widely supported by the finance community, the ambiguity in their definition can lead to managerial discretion without accountability [7-8].

Anecdotal evidence suggested that upholding social value may have a negative impact on corporate profits, thereby affecting the return for shareholders. The perspective of stakeholders could be too narrow, for situations exist where non-economic values are also relevant to the company. However, the concept of social value is theoretically fragmented, which weakens its practical application [7-10]. 

3. Measuring Impact: Constructing Social Return On Investment Frameworks

Using secondary data from HKEX filings, sustainability reports, and academic studies [7-8], we illustrate with sector examples. Our analysis employs a mixed-method approach in the quantitative SROI-financial performance correlations and qualitative case studies with the companies’ stock performances.

Comparative statistics on SRI in Hong Kong-listed companies across the major sectors, drawing on empirical evidence from nine sectors, include MTR Corporation from the transport industry; HK Electric from the utility industry; HSBC from the financial industry; Hang Seng China Construction   Bank from the banking industry; CK Hutchison from the conglomerate industry; Tencent from the tech industry; Sun Hung Kai from the real estate industry; Li Ning from the consumer industry, and Shangri-La from the hotel servicing industry[7-8].

Our analysis of CSR practices under HKEX’s 2025 ESG Reporting Code [7], shows that while traditional metrics dominate, incorporating social value enhances long-term firm value via reduced risks. This is represented by the standard deviation of companies’ shares, and builds stakeholder trust.

Core social values such as equality, human rights, privacy, work safety, and sustainability are universal principles. However, their operationalisation is sector-specific.  For instance, work safety in the transport sector emphasises accident prevention and passenger security, while in the technology sector it focuses on data protection and digital well-being.  Our research standardises these sectoral manifestations into a Hong Kong-specific CSR framework, enabling comparability across industries while standardising these into the social value in the Hong Kong-specific context. This approach reflects the broader literature on “shared value” creation, where universal principles are embedded in industry-specific practices to maximise both social and shareholder value [11-12]. SRI, often aligned with ESG criteria, shows varying scales and growth across these sectors.

Our research builds a comprehensive, actionable CSR mapping model that benchmarks Hong Kong social value against international standards, which analyses against those listed companies’ CSR targets.

The model also includes those key performance indicators (KPIs) with quantifiable metrics and applying industry-specific standards for reporting. They make references to the global reporting standards Global Reporting Initiative (GRI), Sustainability Accounting Standards Board (SASB), UN SDGs, and HKEX ESG [13-18]. Those listing companies’ CSR mapping model that reflects the Hong Kong social value and their quantifiable corporate goals [17-18].

Table – CSR Mapping Model for Social Value

Source: HKSAR CE Policy Address, ICCPR, ICESCR, SDG.

4. Unveiling the Link between the SROI and Stock Returns

SRI often encompasses Environmental, Social, and Governance (ESG) factors, which have seen robust growth in Hong Kong, driven by regulatory enhancements, government initiatives like the Green and Sustainable Finance Grant Scheme (extended to 2027) [7-9], and increasing investor demand.

Hong Kong positions itself as Asia’s leading hub for green and sustainable finance, with over one-third of Asia’s green and sustainable bond issuances arranged here. Key statistics highlight that there is an upward trend, financing from fund management as indicated by the growth in asset under management, fund registrations, debt issuance, and disclosure improvements. These data primarily cover 2022–2024, with projections and early 2025 indicators showing continued momentum [7-9].

SRI in Hong Kong, increasingly integrated with international frameworks, reflects evolving social value. These are tracked through HKEX-mandated disclosures, financial statements, and a sustainable report with impact metrics [11-14].

Our research applies the Social Value International’s (SVI) model for calculating the social value created by Hong Kong’s listed companies.

Hong Kong’s social value factors from the 2025 Policy Address can be mapped to those listed companies’ CSR goals that are quantifiable, measurable, and aligned with the SVI’s framework for calculating social value [13].

In our research, we also adopt a comparative case study design across nine sectors, selecting examples by market cap of the Hang Seng Index constituents.

Data sources include the 2024 Sustainability Reports and HKEX filings. Quantitative analysis: Correlation between SROI and financial metrics, including stock return, ROA, and market value via regression (2019–2024) [7].

Qualitative approaches in the thematic coding of capital budgeting disclosures, NPV adjustments for social ROI. We experimented on 50 companies across nine sectors, and our conclusive analysis highlighted the leading companies, representing more than HK$1.5 trillion of market cap [7].

5. Empirical Analysis and Findings

5.1 Question (i): Beyond Firm Value Maximisation—Role of Social Responsibility

The company’s value maximisation via the function internal rate of return (IRR) is greater than the weighted average cost of capital (WACC). That is foundational for corporate finance decisions, but that would be insufficient in Hong Kong’s CSR/ESG-mandated ecosystem [7-8].

Our research shows that social factors mitigate risks, for example, from reputational damage due to poor labour practices, to unlocking opportunities, such as issuing green bonds that are priced at lower yields.

5.2 Question (ii): Core Social Value for Hong Kong-Listed Corporations

HKEX’s ESG Code includes factors such as employment, health/safety, development/product responsibility, supply chain, community/product responsibility [7-9].

Core values, according to PwC 2024, include equality (diversity), community harmony (engagement), ethical governance (transparency), and sustainability (inclusivity) [7-9].

Our research in the sector-specific analysis on these core values:

In the transport and utility industry, the safety/reliability factor in MTRC has shown a statistically positive correlation in its stock performances, while HKE, which receives subsidies for the elderly, demonstrated similarly positive results that translate into its performances [7-9].

In the financial/banking industry, the ethical lending of HSBC in its environmental climate change policy and China Construction Bank’s lending and finance practices have shown a positive statistical relationship to their corporate performances in terms of profitability and stock price return [7-9].

In the conglomerate industry, supply chain leaders in their ethics, CK Hutchison’s audits across ports/retail have also gained positively in the statistical relationship in its earnings [7-9].

While in the tech industry, in terms of data privacy/inclusion, Tencent’s AI ethics has a positive response rate that translates into its higher earnings driver [7-9].

Last but not least, in the real estate/consumer/hotel industry, in the community integration, leaders such as Sun Hung Kai’s housing strategy, Li Ning’s fair labour practices, and Shangri-La’s local sourcing control, are also statistically positively correlated with their share prices[7-9]. 

5.3 Question (iii): Impactful Corporate Finance Decisions

Impactful decisions integrate CSR via the adjusted metrics in social NPV, which is equal to the conventional NPV – social costs + SROI premium.

Table – Social Return On Investment vs Social Value [19]

Source: HKEX’s sustainability report, green finance report.

All values are expressed in Hong Kong dollars (HK$) billions, representing aggregate project-level investments and monetised social value. Values are derived from FY2024 sustainability reports and HKEX filings, with projections into early 2025.

6. When Social Value Pays: Insights from Leading Hong Kong Companies

Findings affirm social responsibility as a positive driver, which listed companies report enhanced performance via SROI, and sector-specific core values from the listed companies are positively correlated with the listed companies’ shareholders’ value [20-22].

For Hong Kong’s social value-specific factors, corporate finance decisions in their SRI executed their CSR projects, which indicated that their project NPV minus social costs plus SRI premium are positive and significant [20-22].

Corporate finance decisions could also be made with the view of creating social value through CSR projects, which companies can finance through SRI bonds. This could cut funding costs after reducing those risks from reputational damage due to poor labour practices involving penalties and lawsuits, impact on work safety, and public health indemnity issues [20-22].

Chart – Volumes of Socially Responsible Bonds issued in Hong Kong

7. Conclusion

Firm value maximisation is increasingly recognised as an imperative that incorporates social value, as evidenced by the SRI mandate for companies listed in Hong Kong [23]. This evolution reflects a growing consensus in both academic literature and business practice that prioritising corporate social responsibilities can enhance long-term corporate success [24].

Our analysis of the returns on socially responsible investments of Hong Kong-listed companies reveals that core values such as equality and sustainability are becoming essential components of corporate strategies. These principles not only influence stakeholder perceptions but also drive operational efficiencies and consumer loyalty [25].

Additionally, tailored sectoral approaches can facilitate impactful budgeting through the use of integrated financial management tools. For instance, companies that align their budgeting processes with social value objectives can identify areas where investments yield both economic returns and positive societal impacts [5]. This integrated approach allows corporate organizations to assess their financial and social performance simultaneously, fostering greater accountability and transparency [26].

In a landscape where consumers and investors are increasingly valuing corporate social responsibility, businesses that prioritise social value alongside financial performance are better-positioned to thrive [27].

The socially responsible investment mandate thus serves as a catalyst for transformative change in corporate governance, steering companies towards practices that not only contribute to shareholder wealth but also promote the greater good.

This shift signifies a profound rethinking of traditional business models, underscoring the imperative for firms to adopt a holistic view that integrates both economic and social outcomes, ultimately leading to enhanced firm reputation and resilience in a competitive marketplace [28].

Based on our analysis of the social return on investment of the Hong Kong-listed companies, core values like equality and sustainability, tailored sectorally, enable impactful budgeting via integrated tools.

We examined a total of 50 Hong Kong-listed firms across nine sectors. We found that CSR leaders like MTR, HSBC, and Tencent exemplify dual gains in their corporate earnings or shareholders’ value, and positioning as corporate socially responsible, and socially responsible investment leaders [7-9].

Hong Kong-listed companies should carry forward this momentum, as the challenge is not just to make capital budget decisions, but to align them with values that endure.

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Appendix

Social Return on Investment Calculation [19]

Investment based on ESG-related capex according to the company’s sustainable report

Gross value from SRI is based on the result of the SRI monetisation, such as savings, loss mitigation, etc.

Adjustments in the social value that are attributed to the company’s share.

SROI Ratio = Net Social Value / Socially Responsible Investment

Or SROI Ratio = (Total Present Value of Social + Environmental + Economic Benefit) / Total Investment Cost

Adjusted SROI is for including the attribution and deadweight.