上市公司提升 ESG 表現的 25 個方法

【ESG分析師洞見分享】Ryan Fung, CESGA

ESG 遊戲一直由買方(Buyside)主導,上市公司要吸引到這批來勢洶洶的 ESG 資金,除了搞路演登門造訪,不免要靠第三方加持,當中不少上市公司也會找評級機構去認證,務求在 ESG 浪潮分一杯羹。

雖然評級機構絕非萬能,但卻是方便投資者去理解一間公司 ESG 表現的懶人包。評級公司採取諸如碳排放、勞動力性別比率或董事會構成等措施,把一系列參數總匯成一個單一評級。不過,換個角度思考,背後參數如此多,就算公司在某些議題表現特別差,似乎也未能把情況如實反映出來。

在 160 多家評級或數據提供商中,MSCI 的市佔率和影響力遙遙領先於所有競爭對手,在全球散戶投資者買入可持續基金或 ESG 基金的資金當中,有 60% 資金流入會參考 MSCI 評級的基金;而瑞銀更指出,MSCI 食水之深冠絕同行,金融機構幾乎花費每 1 美元在 ESG 數據,MSCI 就能賺取 40 仙。

MSCI 因而遭受評擊,有報道就提到 ESG 評級不是衡量大公司對世界構成的風險,例如溫室氣體排放、污水排放或工人待遇不佳;相反,評級衡量世界對該公司所構成的風險,甚至有一些公司表現備受爭議,仍能提升評級,如摩根大通、DR Horton Inc. 等。

前者自 2015 年底宣佈「巴黎協定」以來,為化石燃料公司承銷的債券數量和從中賺取的費用,超過世界上任何其他銀行,卻獲 MSCI 於 2020 年 12 月將其升級為 BBB;後者則為美國房屋建造大戶,卻在 MSCI 獲得 BBB 評級,更獲納入 iShares ESG Aware MSCI USA ETF,一度吸引不少 ESG 資金。

至於講到如何提升 ESG 評級,「彭博」也有詳盡分析,並列舉出 25 個方法予上市公司參考:

  1. 進行年度員工滿意度調查
  2. 採用商業道德政策
  3. 採取反腐敗政策
  4. 制定防止洗黑錢政策
  5. 制定舉報人保護計劃
  6. 允許員工報告不滿
  7. 提供多元化培訓或計劃
  8. 保護客戶數據
  9. 排除在產品中使用有毒化學品
  10. 創建研究生或學徒計劃
  11. 為員工提供股權
  12. 添加「獨立」董事會成員
  13. 提供綠色債券(適用於銀行)
  14. 提高產品質量
  15. 採用回收政策
  16. 出售電動汽車(適用於汽車製造商)
  17. 在董事會層面創建 ESG 委員會
  18. 減少員工流失
  19. 與當地社區保持溝通(如果擁有天然氣管道)
  20. 制定「負責任的」廣告標準
  21. 為全職和合同員工提供培訓
  22. 設定排放目標;無需包括範圍 3 排放
  23. 任命首席多元化官
  24. 聘請首席信息安全官
  25. 贏得獎項

由此可見,要做好 ESG,或許應該套用網絡流行的一句話:「其實唔難。」但隨著市場對 ESG 的認知愈來愈深,掌握著話語權的 ESG 評級機構參考價值變得具爭議性,如之前也提過 ESG 評級亂象成監管機構眼中釘,令國際證監會(IOSCO)出手進行整頓。但不論如何,像 MSCI、穆迪(Moody’s)、S&P Global Inc. 和晨星(Morningstar)等金融機構,或許諷刺地才是 ESG 浪潮的最大得益者。


瀏覽香港地球之友網頁 www.foe.org.hk 了解更多
綠色金融 Facebook 專頁: https://www.facebook.com/greenfinancefoehk/
香港地球之友 LinkedIn 專頁: https://www.linkedin.com/company/friends-of-the-earth-hk/

How Green are the Electric Vehicles?

Michele Leung, Green Finance Advisor of Friends of the Earth (HK) 

According to the statistics, automobile manufacturers contributed approximately 13%* of total global carbon emissions. Vehicle tailpipe emissions represented nearly 80% of this carbon footprint, which presents the industry’s biggest challenge in decarbonization.

Due to its large carbon footprint, more regulators who focus on climate change are shifting their attention to auto industry. In the recent COP 26, declarations were made by government to work towards all sales of new cars and vans being zero emission by 2040 or earlier. Similarly, in China, the ’14th Five-Year’ New Energy Automobile Industry Development Plan is a critical period for the transformation and upgrading of China’s auto industry. It is targeted to reach 20% share of passenger new electric vehicles sales by 2025. The ambition is to reach 100% of passenger vehicles electrified in 2035.   

The growth of electric vehicles market is exponential. According to International Energy Agency (IEA), based on current trends and policies, it projects the number of electric cars, vans, heavy trucks and buses on the road worldwide to reach 145 million by 2030, which represents nearly 14 times the number observed in 2020. China, in particular, is leading the market with its new electric vehicle penetration rate rose to 13% in 2021.

However, one should note that while electric vehicles do not generate tailpipe emissions, the batteries used to power them are charged via electricity grids which may not be emission free. National grid emissions depend on a range of energy source mix, including coal and renewables. The fact is, this reallocation of emission from tailpipe to grid is still considered and categorized as Scope 3 Category 11 under the Greenhouse Gas Protocol, migrating from indirect use-phase to direct use-phrase emission. According to an industry research paper^, it is found that if all vehicles were replaced with electric equivalents, that industry average Scope 3 Category 11 emissions would have been reduced by 31%, though it is a significant reduction, it is still far from the ideal “zero-emission”.

Nevertheless, accelerating the proliferation and adoption of zero emission vehicles is an important step for automobile manufacturers to decarbonize their carbon footprint and the world to achieve Net Zero.  In parallel, investors are getting more interested in corporates’ electric vehicles strategies. When evaluating the auto industry, in addition to carbon footprint, investors should also be aware of the ESG risks stemming from social aspects. Investors should pay attention to the product recalls and impacts of Over The Air (OTA) updates under product safety.  Investors should also consider how the companies manage their supply chain impacts (especially along the Original Equipment Manufacturer (OEM) model and upstream), as well as the restructuring and talent requirement practices under labour management.

*In 2019 alone, automobile manufacturers constituents of the MSCI ACWI Index as of May 2021 were responsible for nearly 4.7 gtCO2e, approximately 13%2 of total global CO2 emissions.

^ MSCI ESG Research “Electric Vehicles and the Elusive Road to “Zero Emissions”’ by Yu Ishihara, June 2021


Visit www.foe.org.hk for more news about Friends of the Earth (HK)!
Green Finance Facebook page: https://www.facebook.com/greenfinancefoehk/
FoE (HK) LinkedIn page: https://www.linkedin.com/company/friends-of-the-earth-hk/

ESG Investing: A Year in Review and Future Challenges

Andrew Lam, Green Finance Advisor of Friends of the Earth (HK)

ESG Investing is arguably no longer a niche in the investing world. It is no longer the purview of the select social and sustainable minded investor, and has become something integral to the investment process from highly institutionalized pension funds and insurance companies to the mom-and-pop retail investor.

2020 was the year which saw significant uptick in investment and issuance of ESG related investment products, and if anyone thought that was just a one-off event, they would be sorely mistaken, as 2021 has continued the strong investment flow and new product issuance in the ESG universe. As can be seen in below chart, the acceleration in accumulation in assets under management for ESG assets that began in 2020 has continued into 2021.

Global ESG Exchange Traded Funds

The following exhibits show the number of issuances of new ESG ETFs in a year, and as can be seen, 2021 is continuing the strong record set in 2020.

ESG investments as compared with non-ESG investments

It should be noted that all these interests and investment inflows are backed up by strong performance in ESG investments as compared with non-ESG investments. Take the MSCI World SRI index for example, the year to Nov 30, 2021 return for the MSCI World SRI index is 22.75% versus the MSCI World index of 17.3%, an outperformance of 5.45%.

This is a continuation of the strong performance witnessed in 2020, where the MSCI World SRI index returned 20.48%, versus the MSCI World index’s return of 16.5%, an outperformance of 3.98%.

ESG Debt Issuance

In addition to the positive developments in the equity markets, 2021 has seen a stronger proliferation of ESG investment products in the fixed income space, whereas Investment Grade green bond new issues previously dominated issuance, 2021 saw a sharp uptick in ESG debt issuance in the High Yield space. In fact, both investment grade and high yield has seen record issuance of ESG debt in 2021.

Given the positive developments in the ESG investment universe especially in 2020 and 2021, it is now difficult to imagine investment without ESG. However, making ESG mainstream is only half the battle of the goal of making businesses sustainable. The other half is making sure these ESG reporting and issuance criteria translate to real sustainable impact.

The issue of greenwashing has not been completely dealt with and there remains a lack of empirical evidence linking ESG securities to a measurable ESG metric, for example, does a US$1 billion inflow into the MSCI World SRI Indexed ETF contribute to a measurable amount of reduction in greenhouse gas emissions?

Looking ahead in 2022..

While there is still much work to be done to make our world truly sustainable, what transpired in 2020 and 2021 with regards to ESG investing has been encouraging, however it is our collective responsibility to continue to fine tune the ESG investing process, to hold the issuers accountable to their sustainable declarations and pledges, and most importantly to be able to empirically measure and link investment into ESG products to measurable ESG goals.

REFERNCES

  • Graham, J. S., Prakash, A., Chandgothia, A. (2021), “ETF Spotlight: Thematic and ESG – the next legs of growth”, Goldman Sachs Global International Research
  • Lynam, A., Karoui, L., Puempel, M., Young, M., Rogers, S., Manzo, M., Viswanathan, V. (2021), “ESG Credit Monitor: A breakout year for HY borrowers”, Goldman Sachs Global International Research
  • MSCI Inc. (2021) “MSCI World SRI Index”, MSCI ESG Research Inc

Visit www.foe.org.hk for more news about Friends of the Earth (HK)!
Green Finance Facebook page: https://www.facebook.com/greenfinancefoehk/
FoE (HK) LinkedIn page: https://www.linkedin.com/company/friends-of-the-earth-hk/

Tackling Asia’s Agricultural Emissions

Alexandra Tracy, Green Finance Advisor of Friends of the Earth (HK)

Agriculture and deforestation, through burning and clearing, generate more than 20 percent of emissions in the Asia Pacific, including 40 percent of methane emissions (largely from livestock farming).  Off farm activities, meanwhile, contribute a growing share of food system emissions across the entire production, transportation and consumption chain.

We are well aware of the vulnerability of the farming sector in Asia to potential climate change.  Flooding in China’s Henan province in 2021 impacted around 2.4 million acres of cropland, as well as food processing facilities.  India and the Philippines also experienced torrential rainfall, causing mass evacuations and crop damage.

As the urban population grows, food security has to be a priority

However, tackling Asia’s agricultural emissions facesa range of complex challenges.  Agriculture is crucial to livelihoods in the region’s emerging markets where more than 100 million smallholders produce over 80 percent of the food consumed.  In an area where nearly 500 million people are still undernourished, food security is the priority for many policy makers.

And food security has to remain an important focus as Asia’s urban middle class is growing at an extraordinary rate.  By 2030, around 555 million people are likely to have moved into cities, where they will generate increasing demand for new types of food, especially meat and dairy products.  Per capita beef consumption alone in China could increase by over 40 percent in the twenty years to 2030.

At the same time, new urban areas are rapidly encroaching on farmland, and as people migrate into cities, workers leave the agricultural sector.  Indonesia could lose about 8 million farmers by 2030.  As fertile land is destroyed and the numbers of productive workers shrink, previously untouched areas have to be brought into cultivation.

Government interventions can have negative impacts

Governments in the region have responded to the challenge of food security with mechanisms such as tariffs, quotas and subsidies to provide support to farmers.  Incentives to increase production create enormous pressure on natural resources, especially water.  More than 450 million people in Asia already experience very high water stress, as farmers face increasing competition for water from industrial and residential users.

Government interventions to increase food yields are also pushing up emissions.  Subsidies for chemical fertilisers have led to considerable overuse, generating substantial emissions of nitrous oxide, a greenhouse gas more than 300 times more potent than carbon dioxide.

Technology will transform agricultural production and lower emissions

The agriculture sector in Asia is in the early stages of a major transformation, which combines mechanisation and automation with better inputs (seeds, fertilisers) and greater availability of information about production techniques and market trends.  More machinery reduces the need for human labour, while increasing adoption of computer systems, electronics and data management creates cost savings and efficiencies.  This has the potential both to increase productivity and to have a material impact on emissions in the region.

Precision agriculture, involving high technology sensors and analytical tools, is being introduced to wealthier markets such as Japan and Korea.  It uses data to monitor crop status and soil condition and to manage more efficiently processes such as irrigation, planting and use of fertilisers and pesticides. 

Drones play a key role in precision agriculture, both for gathering data and by replacing manual labour.  Agricultural drones can spray 40-60 percent faster than manual spraying, creating 30-50 percent savings in the use of chemicals and up to 90 percent less water use.

The farming sector already consumes more than 80 percent of water resources in Asia, and as demand for meat grows, a great deal more water will be required for its production.  A large proportion of farmlands in the region is served by pumping groundwater, which is extremely energy intensive.  It is estimated that in India lifting water for irrigation contributes as much as 11 percent of the country’s emissions.  Drip irrigation helps to address this, as it feeds the plant instead of the soil, delivering water and liquid fertilisers straight to the roots, which greatly lowers water consumption. 

…As will better farming practices

Rice cultivation generates around 50 percent of all crop related emissions due to the age old practice of flooding paddy fields.  This reduces the growth of weeds, but also produces methane, which is more than 20 times more damaging than carbon dioxide.  The Sustainable Rice Platform, based in Bangkok, works with farmers in Thailand, Vietnam and elsewhere to enable them to develop more sustainable growing practices.  

Where does finance come in ?

In much of Asia, of course, these new technologies are unaffordable for most farmers.

In some cases, governments have provided backing for local initiatives, such as in Rajasthan in India, where financial support from the Ministry of New and Renewable Energy has led to the state becoming the country’s solar water pump leader, allowing farmers to replace diesel pumps and giving them higher yields and multiple harvests per year.

In the private sector, providers of microfinance have traditionally been active in the farming sector, and more institutional capital is being directed into climate friendly agriculture in Asian emerging markets, much of it catalysed by multilateral and development banks or “patient” philanthropic funding. 

Market mechanisms can also provide incentives for poorer farmers, such as the Sustainable Rice Platform’s certification programme which allows them to sell product to global buyers such as Olam International in Singapore.


Visit www.foe.org.hk for more news about Friends of the Earth (HK)!
Green Finance Facebook page: https://www.facebook.com/greenfinancefoehk/
FoE (HK) LinkedIn page: https://www.linkedin.com/company/friends-of-the-earth-hk/