Ping An sees China's new ESG norms boosting transparency
Ping An Insurance expects China’s new ESG disclosure standard for insurance companies to improve the $4 trillion industry’s transparency across environmental, social, and governance metrics.
Acknowledging ESG as an important bridge for China to participate in international best practices on governance, the country’s top insurance association also hopes the standard could help integrate the nation’s industry into international markets and facilitate greater understanding of Chinese insurers’ experiences.
The remarks follow the release of new guidelines on ESG disclosure for insurance institutions in December last year. Issued by the Insurance Association of China, the practices represent China’s first insurance-specific standards for disclosure.
Considering the industry’s capabilities on ESG disclosure are still at an early stage of development, compliance with the new guidance is voluntary, noted Richard Sheng, Ping An’s group board secretary.
“Under the effective leadership and promotion of the Insurance Association of China, I believe there will be a better disclosure rate in the industry, and the quality of disclosure can be effectively improved,” Sheng told AsianInvestor.
Existing ESG disclosure standards in China are mainly for listed companies, and compliance is also mostly voluntary.
“The new rule could guide small and medium-sized insurance companies to standardise disclosure, which will facilitate the high-quality development of the financial industry,” Sheng added.
According to a report released by a domestic research institute in 2023, a total of 1,771 onshore listed companies in China published an ESG or social responsibility report in 2022, accounting for 34% of all listed companies in the Rmb79 trillion ($11.2 trillion) stock market.
RESTRICTIVE POWER
As one of the largest asset owners in China, Ping An was a major contributor to the new guidelines. The firm runs its own ESG data system that carries out rating, scoring, and analytical functions.
The new industry standard sets the bar across 23 tier-1 indicators and 49 sub-indicators, combining quantitative and qualitative approaches, with a focus on greenhouse gas emissions, green finance, inclusive finance, and employee protection and development.
It also references the Global Reporting Initiative (GRI), the Sustainability Accounting Standards Board (SASB), and the Hong Kong stock exchange, while also considering the unique characteristics of China and its insurance industry.
For example, it includes disclosure on rural revitalisation, and how the company supports the real economy. Both are stated priorities that Chinese authorities have put forward for the financial industry.
In June 2022, Chinese regulator released green finance guidelines for the banking and insurance industry, which outlines basic requirements for responsible investment, stewardship, corporate governance, and risk management.
In May of the same year, the State Council’s think tank, China Enterprise Reform and Development Society (CERDS) also introduced the country’s first ESG disclosure guidance for enterprises. Compliance is not mandatory.
Compared to the CERDS recommendations, the new insurance ESG disclosure standard has a certain restricting and guiding role for companies. Behaviours will be self-regulated and monitored by the industry association, Sheng noted.
Within the Chinese regulatory landscape, the Insurance Association of China falls under the supervision of the National Administration of Financial Regulation. Although it is a self-regulatory, non-profit organisation, the association – along with the Insurance Asset Management Association of China – does have notable impact on industry practices.
Its 347 members include onshore insurance companies, insurance asset management companies, and intermediaries.
In Asia, Hong Kong and Singapore are the faster movers in climate-related disclosure, with stock exchanges in both markets advancing toward mandatory climate disclosure for all listed companies that are aligned with the International Sustainability Standards Board (ISSB) standards.