China lags behind other markets in climate-risk disclosures: Ping An

September 24, 2020.

Chinese companies need to develop more rigorous standards for disclosing and understanding risks posed by climate change, researchers from Chinese insurer said in a report Thursday. 

Analyzing Bloomberg data, Ping An said that out of four major stock indexes — the U.S.’s S&P 500, China’s CSI 300, Europe’s EURO STOXX 50 and Japan’s Nikkei 225 — Japanese businesses led the crowd with 52% of companies on the index having discussed climate risk in their sustainability reports.

Chinese companies “significantly lag behind” with only 3% reporting on climate risk, according to Ping An, China’s largest insurer by premiums. Europe and the U.S. were much closer to Japan with respective rates of 40% and 33%.

Joined by Imperial College London and Chinese fintech company OneConnect, the Shenzhen, China-based insurer said its analysis was based on a sample of 277 documents from 182 companies to determine which included climate-risk disclosures in their sustainability reports.

Ping An also found that more than 90% of all companies that gave climate disclosures reported on metrics such as carbon-dioxide emissions and energy usage. Financial-impact metrics were included less often, ranging from an 80% reporting rate on revenues to 16% on capital and financing.

These results were based on an analysis of 277 documents from 182 companies to determine which climate-risk disclosures were in their sustainability reports.

To improve disclosures and aid investors, the report’s authors recommended clarifying the link between climate-risk exposures and financial performance. They also called for a greater emphasis on forward-looking rather than backward-looking information to better capture climate effects, suggesting tools like future production curves over carbon footprints.

But the authors said pressure must ultimately come from regulators and standard-setting bodies to create rigorous disclosure standards and prevent companies from “greenwashing” their climate record by selectively releasing information.

“The identification of best practice benchmark can allow investors to gauge the breadth and depth of an entity's climate disclosure, as well as help identify those companies that make selective disclosure to misrepresent their climate risk profiles,” Ping An said.

Ping An created an ESG rating system in June meant to help Chinese companies catch up to the rest of the world in disclosures and responsible investment. The insurer said it drew inspiration from other ESG disclosure standards to create a “China-specific” tool that tracks up to 394 indicators across 13 themes.