China Chemical Intelligence Information Association (CCIIA) has published the country’s first ESG ratings guide for listed Chinese firms in the petroleum and chemical industry, as reported by Eastmoney on November 19. The ratings guide has created a unified framework for ESG performance assessments of Chinese oil and petrochemical firms, and has established an industry standard for future ESG information disclosure. According to China Chengxin Green Finance Technology, a subsidiary of China’s first credit rating agency, China Chengxin Credit Management, it will apply the guide in its future ESG ratings and rankings for domestic petrochemical firms, in order to enhance the quality and quantity of ESG data in China’s corporate reporting.
The ratings guide has consulted the Shanghai Stock Exchange (SSE), HKEX [0388:HK] and Global Reporting Initiative (GRI) CSR disclosure requirements as references, and has been widely reviewed by a range of related parties, including the Chinese Academy of Social Sciences, Agricultural Bank of China [1288:HK], Sinopec [SNP:US], and PetroChina [PTR:US], to establish a coherent ESG assessment standard. In the document, the evaluation indicators for the environmental dimension includes emissions, resource utilization, sustainable operation, environmental risk disclosure and others, whereas the social dimension covers indicators such as production safety, employee, product social responsibility and supply chain management. Meanwhile, the governance dimension primarily assesses the company’s governance structure, and operation, and governance behavior.
Currently, China aims to hit peak carbon dioxide emissions by 2030 and achieve carbon neutrality by 2060. According to a report from Tsinghua University, the proportion of non-fossil energy in primary energy construction should come to at least 20% by end-2025, and 25% by end-2030. By 2050, non-fossil fuel should make up more than 80% of China’s primary energy consumption. However, the figure came in at only around 15.3% in 2019. Thus, it is necessary to quickly shift from fossil fuel energy to renewable energy such as natural gas, hydro power or wind power in the country, especially in the traditionally high-polluting oil and gas industry. Notably, as of September, a total of 507 petroleum and chemical enterprises have gone public in China, including 390 A-share listed companies and 117 H-share companies, representing over 10% of all listed firms in the country. The launch of this ESG ratings guide could set a foundation for the introduction of mandatory ESG disclosure requirements for A-share listed firms.