Shenzhen-based Ping An, one of the world’s largest insurers by assets, has developed an ESG ratings framework it says is “suited to China”.
According to a release, the newly-launched CN-ESG Smart Rating System “builds on the ESG compliance disclosure requirements of the Hong Kong Stock Exchange (HKEX) and the Shanghai Stock Exchange, as well as international guidelines from the globally influential MSCI ESG Ratings and Dow Jones Sustainability Indices”.
From next month, HKEX-listed companies will have to comply with stricter ESG rules which include requirements for board-level oversight of sustainability issues and disclosure of climate-related risks. Similar rules are expected to be introduced by the Shenzhen and Shanghai exchanges later this year.
Ping An’s new ratings system is intended to provide Chinese companies “actionable insights to improve their ESG ratings” and to support corporate decision-making. The insurer claimed that there is currently too much diversity in the approaches of ESG data providers, “resulting in different ratings for the same company”.
In analysis of the impact of Covid19 on the top 300 stocks traded on the Shanghai and Shenzhen exchanges, Ping An said industries considered “ESG-friendly” – which include computer applications, electronic manufacturing, medical equipment and environmental engineering and services – significantly outperformed “ESG-unfriendly industries” on profitability and stock market performance.
While ESG investing is yet to gain critical mass among Chinese investors, there are already a number of domestic providers of ESG ratings which include the China Alliance of Social Value Investment, SynTao Green Finance and the Sino-Securities Index.
The launch comes a week after Ping An called upon Chinese regulators to develop mandatory sustainability disclosure standards. The new rules, the insurer suggested, could be based on existing guidelines by the Global Reporting Initiative, the Principles for Responsible Investment (PRI) and “local market considerations”.
Ping An – the PRI’s first Chinese asset owner signatory – said that improved ESG disclosures would “help improve the credibility and value of Chinese companies for global investors”.
The insurer noted that ESG disclosures produced by Chinese companies were currently ranked lowest among its peers globally by Bloomberg.
Ping An is also the second largest shareholder in HSBC Bank, which recently drew controversy for backing new security laws in Hong Kong, which residents fear could severely curtail human rights. The move was criticised by Aviva Investors, another major HSBC shareholder, which said it expected the bank to “speak out publicly if there are any future abuses of democratic freedoms connected to this law”.