SuperFinance has published its 2021 Environmental, Social, and Corporate Governance(ESG) Ratings Report for China's banking and non-banking financial sectors, a breakthrough in the ESG data puzzle and scoring methodology that has plagued the corporate and financial communities for years.
ESG disclosure and ratings have the potential to enhance corporate transparency, investor confidence and market integrity. Utilizing its expertise and rich experience in ESG, SuperFinance rated the ESG performance of 117 listed companies in China's A-share banking and non-banking financial sectors and analyzed and summarized the ESG development status of the industry. SuperFinance is the first firm in the industry to adopt an 'investor-pay' model, guaranteeing the independence and impartiality of rating results and minimizing potential conflicts of interest in ESG scoring.
According to 2021 ESG rating results provided by SuperFinance, the average ESG score of the 36 listed companies in China's A-share banking industry was 44.0 out of a possible 100 points. The top three companies with the highest ESG scores in the industry were Bank of China (65.2/B+), ICBC (62.4/B+), and Agricultural Bank of China (61.9/B+). The average ESG score for firms in the non-banking financial sector was just 34.6. Among the 81 listed companies in this sector, the top three ESG scores were obtained by China Securities (64.7/B+), PICC (64.1/B+), and Ping An Insurance (63.7/B+).
Overall, the ESG scores of firms in China's financial sector ranked relatively low, and underlying ESG data remains scarce. But given China's commitment to achieving carbon neutrality by 2060, and the fact that sustainable finance can help China transition to a low-carbon economy and improve corporate reputations and performance, Chinese executives are placing increasing emphasis on the value of ESG. World Brand Lab has recently incorporated SuperFinance's ESG score results into its brand value assessment system.
The effectiveness of the ESG evaluation from SuperFinance has been measured by third-party entities. Dr. Karthik Ramanna, professor of business and public policy at University of Oxford, argues that a wealth of academic evidence suggests that buy-side analyst reports are more prudent in their outlook than sell-side reports, perhaps due to the conflicts of interest that can occur in sell-side reports. Ramanna expects that investor-pay ESG ratings will be more reliable than issuer-pay ratings. Previously, Nobel laureate Paul Krugman published an article criticizing the issuer-pay model employed by mainstream ratings agencies, because that model can lead to conflicts of interest and nullify the objectivity of their review.
Several empirical studies based on SuperFinance's ESG ratings results for Chinese listed companies have found evidence that ESG scores are positively correlated to brand value, stock price, and executive compensation.
"Stakeholder marketing strategies are quietly changing," said Dr. Ravi Dhar, professor of management and marketing at the Yale University School of Management. "Companies must try to jointly solve problems that concern not just one category of stakeholders, but stakeholders at all business levels."
Dr. John Deighton, professor emeritus of business administration at Harvard University, noted that activists are increasingly making such social costs public; and when a brand ignores these costs, its reputation suffers.
"A considerable amount of academic research and practical experience has proved that ESG factors can help investors obtain better returns as a result of reducing of risks," said Haisen Ding, Chairman of SuperFinance. "This is because ESG evaluation and analysis enables investors to understand a company's sustainable-development performance and social-responsibility fulfillment to effectively avoid internal corporate risks that are not reflected in traditional financial indicators."
SuperFinance was established in Beijing in 2018 and has offices in New York, Hong Kong, and London. SuperFinance developed its proprietary SuperScore ESG assessment model, which combines domestic and international academic research with its own research methods to provide a more transparent and reliable evaluation of the Chinese capital market.
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Original Source: SuperFinance Publishes 2021 ESG Ratings Report for China's Financial Sectors
