With the introduction of China's macro strategic goal of "peaking carbon emissions by 2030 and achieving carbon neutrality by 2060", the society's attention to clean energy and green low-carbon economy has sharply increased. Asset management institutions, market public opinion, and policy regulation have jointly promoted ESG concepts, and ESG has attracted more and more attention from enterprises and investors. What exactly is ESG that has gained popularity? What is its role for businesses and investors? Today, let's use an article to understand ESG.
1、 What is ESG
ESG stands for Environmental, Social, and Governance, and is an investment philosophy and evaluation standard that focuses on the environmental, social, and governance performance of a company rather than its financial performance.
2、 The Origin and Development of ESG
ESG originated in Europe and America, and its concept originated from socially responsible investment (SRI), which is one of the three most important considerations in SRI. The first ESG fund in the United States was established in 1971, and the first ESG index was established in 1990. In 2006, the United Nations established the United Nations Principles for Responsible Investment (UNPRI). In the early stages of its establishment, over 80% of the signing agencies came from Europe and America, and ESG investment had already been widely recognized in Europe and America at that time.
In recent years, with the proposal of the goals of "peak carbon emissions" and "carbon neutrality", the transformation of the domestic capital market, and the acceleration of the transformation and upgrading steps of domestic enterprises, ESG has become a hot topic frequently mentioned by regulatory agencies and enterprises, and ESG information disclosure is also moving towards standardization. In September 2020, the Shenzhen Stock Exchange released the "Assessment Measures for Information Disclosure of Listed Companies on the Shenzhen Stock Exchange (Revised in 2020)", which added Article 16 "Disclosure of Fulfillment of Social Responsibility" and mentioned ESG disclosure for the first time. In the same month, the Shanghai Stock Exchange also formulated and released the "Guidelines for the Application of Self Regulatory Rules for Listed Companies on the Science and Technology Innovation Board of the Shanghai Stock Exchange No. 2- Voluntary Information Disclosure", which clearly stated that on the basis of voluntary disclosure of environmental protection, social responsibility performance, and general information on corporate governance, enterprises should further disclose personalized information on environmental, social responsibility, and corporate governance according to their industry, business characteristics, and governance structure. According to statistics, the number of companies in China that release ESG related reports has been increasing year by year, from 946 in 2019 to 1130 in 2021.
3、 ESG evaluation dimensions
The content of ESG philosophy and evaluation system includes multi-level and multi-dimensional factors that enterprises need to consider in their operations. According to guidelines from the three major international organizations (ISO2600 Social Practice, SASB/GRI Sustainability Report), disclosure information from ESG rating agencies regarding ESG ratings, and ESG investment guidelines issued by 12 international exchanges, these factors mainly include:
Environmental aspects: carbon and greenhouse gas emissions, environmental policies, waste pollution and management policies, energy use/consumption, natural resource (especially water) use and management policies, biodiversity, rationality, employee environmental awareness, green procurement policies, energy conservation and emission reduction measures, environmental cost accounting, green technology, etc.
Social aspects: gender and gender balance policies, human rights policies and violations, associations (or communities), health and safety, management training, labor norms, product responsibility, occupational health and safety, product quality, supply chain responsibility management, targeted poverty alleviation, public welfare and charity, and others.
In terms of governance: corporate governance, policies to prevent corruption and bribery, anti unfair competition, risk management, tax transparency, fair labor practices, ethical codes of conduct, compliance, board independence and diversity, organizational structure, investor relations, etc.
4、 The role of ESG
1. For investors
Based on ESG evaluation, investors can assess a company's investment behavior and its contribution to promoting sustainable economic development and fulfilling social responsibilities by observing its ESG performance. Unlike traditional financial indicators, ESG examines a company's ability to respond to risks and long-term development from the perspectives of environment, social performance, and corporate governance. It is an emerging way of evaluating companies.
2. For enterprises
According to the interpretation of the Hong Kong Stock Exchange and mainland regulatory agencies, the value of ESG to enterprises mainly focuses on the following aspects:
① Effective disclosure can bring many benefits to businesses.
② Strengthen the management of environmental and social risks, and promote the improvement of sustainable development capabilities of enterprises.
③ Establish a responsible corporate brand and image, and enhance corporate reputation.
④ Choose responsible suppliers, jointly safeguard customer rights, and enhance customer satisfaction.
⑤ Pay attention to the growth of internal employees in the enterprise, attract and retain talents.
⑥ Continuously contributing to the community, achieving a win-win situation for both the enterprise and society.
5、 Guanzhong Ecology and ESG
As a company listed in 2021, Guanzhong Ecological actively responds to the demands of the capital market and fulfills its social responsibility as a listed company. Since its listing, it has carried out ESG reporting (environmental, social, and corporate governance) disclosure work and released the "2021 Environmental, Social, and Governance Report" in April 2022.
In February 2023, the preparation of the 2022 ESG report for Guanzhong Ecology was officially launched. During the planning meeting, Chairman Li Chunlin stated that the corporate development philosophy of Guanzhong Ecology is highly aligned with ESG principles. At the beginning of its establishment, the company made environmental protection and restoration work its main business, established the corporate mission of "sowing the future for the earth and making the earth green again", and listed "social value" as one of the core values of the enterprise. For 22 years, the company has been committed to ecological environment protection and restoration, adhering to the path of sustainable development, making unremitting efforts to promote harmonious coexistence between humans and nature, and deeply practicing the responsibility of "environment, society, and corporate governance". The core of ESG is sustainable development. Through ESG strategies, the concept of green and sustainable development of enterprises can be concretely expressed. Therefore, it is important to focus on presenting it in a data-driven manner and not to make ESG report disclosure a formality. In the future, the company will establish an ESG strategic system and deepen its interaction and integration with the capital market.
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