Chinese financial services provider Ping An Insurance [2318:HK] and state-backed China Economic Information Service (CEIS) have jointly launched a proprietary ESG ratings system specially designed for the Chinese market, namely, the Xinhua CN-ESG System, as reported by Yicai on December 5. The rating system covers more than ten ESG-related themes, with over 130 basic indicators and 350 data points, based on guidelines from the MSCI ESG Ratings and Dow Jones Sustainability World Index. It has made use of advanced technologies such as natural language processing (NLP), machine learning and remote sensing, to minimize human subjectivity and generate timely investment suggestions for its clients.
Ping An was one of the initial asset management firms in China to sign the UN’s Principles for Responsible Investment (PRI) and Climate Action 100+ in 2019. The launch of the Xinhua CN-ESG System indicates Ping An’s continued ambition to lead in China’s ESG monitoring and management. As Ping An has stated, it will further deepen its collaboration with CEIS in ESG data platform construction, ESG-related corporate assessment and consulting services and other fields, amid emerging ESG trends in China.
As of 2019, 607 Shanghai-listed Chinese enterprises and 399 Shenzhen-listed companies published their annual ESG reports, which in combination, represented 25.54% of all publicly-traded firms in China that year, suggesting that there is still ample room for improvement in Chinese companies’ ESG disclosure. Meanwhile, global investments in ESG-themed exchange-traded fund (ETF) in China reached a record high of USD20.5bn in 2019, citing a report from Ping An, soaring 464% YoY. So far, in 2020, pure ESG funds have logged a 47.07% annualized return, while pan-ESG concept funds, environment-themed funds and corporate governance funds have posted 56.4%, 70.02% and 47.91% in annualized return, respectively, as compared to the average of 42.22% for the overall equity fund market. The total issuance size of ESG-themed funds by early December also witnessed a 36% increase from last year’s figure, and has almost doubled the number as of the end of 2018.
According to Ping An, the introduction of a China-specific ESG rating system could help Chinese firms better perceive their ESG risks, and improve their ESG information disclosure procedures. Moreover, the system could offer data support for fund management firms to develop more diverse ESG products, including passive index funds, quantitative funds, as well as ESG-related investment products in the primary market, to meet different requirements from investors.