Big Gaps Found in Climate Risk Disclosures in China

Published Big Gaps Found in Climate Risk Disclosures in China #forex #trading

Big Gaps Found in Climate Risk Disclosures in China Photo

HONG KONG and SHANGHAI, Sept. 24, 2020 /PRNewswire/ -- Ping An Insurance (Group) Company of China, Ltd. (hereafter "Ping An" or the "Group", HKEX: 02318; SSE: 601318) announced today that the Ping An Digital Economic Research Center and OneConnect in collaboration with Imperial College London released a new report that used natural language processing (NLP) techniques to assess the current state of climate risk disclosures among the largest companies in China and the United States. The report found that Chinese companies in the CSI 300 lag significantly behind their global peers in the S&P 500 in climate risk disclosures and need to work towards wider adoption to catch up.

The report, "Where we stand on climate disclosures and why we need them", applied NLP techniques to analyze 277 documents for climate risk disclosures from 182 companies between July 2019 and July 2020. The tool could enable investors to gauge the quality of companies climate disclosures in a scalable fashion.

The report calls for tighter links between climate risk exposures and financial performance and adoption of more forward-looking information in truthful, transparent, and communicable disclosures, with the help of scalable technology tools to automatically assess disclosure quality.

Despite companies increasing adoption of climate disclosure frameworks such as the international Task Force on Climate-related Financial Disclosures (TCFD), there is wide variation in the adoption of specific recommendations. The report found:

1. Japanese companies have the highest incidence of discussions of climate risks in their sustainability reports, followed closely by European and US companies. Chinese companies lag significantly behind their global peers.

2. Among US and Chinese companies that disclose climate risks, the report identified six distinct themes: "Energy usage", "Governance", "Human rights and employee health and safety", "Climate-related risk management", "Emissions", and "Global Reporting Initiative (GRI) reporting and materiality".

3. Despite international frameworks such as the TCFD, which recommends linking climate risk exposures and financial performance, financial impact metrics are not well disclosed by companies. Purely climate-related metrics have higher disclosure rates.

4. The report calls for Chinese companies to catch up with their global peers by taking the step to disclose in the first place. For all companies, there is still gap between current state of disclosures and requirements from guidelines such as the TCFD.

The report is part of a broader joint project on "Climate Risk and Financial Innovation" between Ping An Digital Economic Research Center and Imperial College London. The collaboration aims to leverage cutting-edge academic research and industry expertise to develop robust methodologies for assessing the impact of climate risks on investment assets. These methodologies will be deployed to inform the development of innovative financial products such as disclosure transparency index, new insurance contracts and financial instruments related to climate risk valuation, and the provision of advisory services to the industry.

Ping An Insurance (Group) Company of China, Ltd. ("Ping An") is a world-leading technology-powered retail financial services group. With over 210 million retail customers and 560 million Internet users, Ping An is one of the largest financial services companies in the world.

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