Crypto-token incentive mechanism to construct ESG Index
PI: Prof. George Q Huang, HKU
Co-I: Dr. Yelin Fu, HKU
Environmental, Social and Governance (ESG) index is designed to measure corporations’ ESG performance, and help investors to navigate around ESG risks. Although various ESG indices have been developed by many professional agencies, the ESG data authentication, consistency, and transparency have been largely unexplored. This research proposes a crypto-token incentive mechanism to construct ESG index. Specifically, we begin with designing the fact-, consistency-, and transparency-token incentive mechanism in ESG report preparation, generation, and publication stages. Game theory based operational rules are created to assign the tokens. Then we devise smart contract to execute these token assignment rules in the consortium blockchain for building ESG index. Finally, the fact-, consistency-, and transparency-tokens are aggregated to construct ESG index, by means of developing the sophisticated aggregation schemes. A case study will be conducted using the ESG practices of Hong Kong apparel industry to demonstrate the effectiveness of this research.