China’s top asset managers fall short on climate risk disclosure: Greenpeace
Top Chinese asset management companies could disclose much more and much better information about how they are tackling the climate risks to their businesses and investments, a new Greenpeace report claims.
Though they have displayed some commitment to environmental, social and governance (ESG) issues by joining international initiatives and winning some awards, they have limited their action to the general concept of ESG and have neglected to spell out the impact of their activities on climate change, said Yuan Yuan, climate and energy campaigner, East Asia, at Greenpeace.
The Greenpeace report used publicly available information to evaluate the performance on climate of 15 leading asset managers in China by asset size from January 2021 to June 2022.
Most of them are responsible for managing China’s basic public pension and annuity funds, including the National Social Security Fund, which is the fundamental pension system of the country’s 1.4 billion people.
These asset managers include China Asset Management, E Fund Management, Harvest Fund Management, Da Cheng Fund Management, Southern Asset Management, and GF Fund Management.
POOR DISCLOSURE
“Following the central government’s strong support on carbon neutral and green finance, these fund managers have been reacting proactively by joining international initiatives such as the Principles for Responsible Investment (PRI). Some even won industry awards on ESG. They should have performed better on climate issues,” said Yuan.
“However, our research found that few have comprehensive disclosure of climate issues or have regular ESG reports,” Yuan told AsianInvestor, noting that the industry is showing increasing momentum in ESG action generally, but is still in the early stages of taking action on specific climate issues.
Of the firms Greenpeace evaluated for its report, only ChinaAMC and Southern Asset Management have announced net-zero targets for their own business operations, but not their investments.
In a report published in May, ChinaAMC said it has been working towards carbon neutrality of its own operation since 2021, and it aims to complete carbon target setting of its portfolio by 2025. The company declined to comment on the report.
In Southern Asset Management’s 2021 ESG report published in June, the company said it has achieved carbon neutrality of its own operation in 2020. The firm did not respond to request for comments.
Compared to carbon emissions related to investment, carbon emissions from daily operation of financial institutions are relatively small, and it is not difficult to achieve carbon neutrality at the operational level, the report noted.
By the end of May, no Chinese asset managers are among the 273 signatories of the Net Zero Asset Managers Initiative, members of which have committed to achieving net zero by 2050.
Moreover, 11 of the 15 firms in the Greenpeace report didn’t disclose their actual and potential climate risks on their businesses, investments, balance sheets, and future cash flows. The other four did so, but only by using low-quality information and general and abstract language rather than quantitative information.
“Most available disclosure is perfunctory,” Yuan said.
In fact, the latest version of Ping An Insurance’s proprietary ESG evaluating and scoring system removed some metrics based on data that are rarely disclosed in China, including climate-related issues' material financial impact on the company, in areas such as revenue, expenditure, capital, and financing.
GREENWASHING?
The lack of disclosure is also reflected in what funds do or don't reveal about their sustainable investment products. The research selected 37 A-share active mutual funds labelled green or sustainable, and looked into the top 10 stock positions as of the end of 2021 to screen carbon-intensive targets.
It found that only two funds lived up to their green or sustainable label, while 23 funds, or 62% of the total of 37, consisted of carbon-intensive targets. Another six new funds haven’t disclosed their positions.
The funds are also deficient about their transparency. Each of the 37 funds only disclosed general financial indicators in their half-year and full-year reports, but no mention of specific sustainable investing-related information, the report said.
“There are signs of greenwashing, which could potentially impair the interest of investors and lead to lower trust in the whole industry,” Yuan said.
Asset management companies fall well behind banks and insurance companies with their disclosure efforts. This is partly because the regulator of banks and insurers, the China Banking and Insurance Regulatory Commission (CBIRC), has released more regulations on the issue, she noted.
While they have different regulators, there has been a general trend to strengthen rules and guidelines relevant to ESG and climate issues by all Chinese regulators, Yuan said.
“As long-term investors, asset management companies should attach more importance to climate issue-related risks, including stranded asset risks due to climate change and the risk of policy transformation,” Yuan said.
“We hope they can move ahead of regulators…The sooner they start, the fewer the cost,” she said.