Ping An: Lack of standard reporting models hampering ESG efforts
There is growing debate around environmental, social, and governance (ESG) investment in emerging markets, as well as the role of responsible insurers to combat climate change, particularly in regions with differing views on these issues, according to Gareth Hewett, head of international ESG for China’s largest insurer, Ping An Group.
Ping An
“We've had to upgrade our ESG endeavour and increase our engagement and membership with various international organisations,” Hewett said at AsianInvestor’s Insurance Investment Briefing on September 20.
One of the major challenges discussed was the introduction of new climate-related disclosures aligned with the International Sustainability Standards Board (ISSB) — specifically, the sustainability reporting (IFRS S1) and climate (IFRS S2) standards proposed by the Hong Kong exchange in June.
“These standards will affect all Hong Kong-listed entities,” said Hewett. “China is yet to make a commitment to them, although active discussions are underway.”
The ISSB Climate Standard builds on the principles and recommendations of the Task Force on Climate-Related Financial Disclosures (TCFD).
“This will have a big impact in that it will bring about a baseline — a new common reporting standard — for climate change and ESG,” he said.
Hewett believes that IFRS S1 will likely be the easier standard to adopt, although it will require companies to quantify risks in more detail.
However, for a large insurer like Ping An, which has around ¥800 billion ($110 billion) in ESG rated funds, obtaining and maintaining consistent and comparable data across sectors and geographies to meet the IFRS 2 standard is going to be very challenging, he said.
Hewett believes that over time, standard models will emerge, bringing about a new common reporting standard for climate change and ESG — but for now, they do not exist.
“This is very actively being discussed by not just us internally, but in China as a national discussion point.”
RESPONSIBLE INVESTOR
Moving on to the topic of responsible investment in an insurance company, Hewett highlighted Ping An's use of tools and frameworks to construct portfolios and accredit ESG investment opportunities.
Ping An currently leverages the CN ESG framework, an AI-based system utilising natural language processing and knowledge graphs, which helps in ranking and indexing the ESG rating of listed companies in China.
“In China, you've got 5,000 A-share listed companies and more than 2,000 Hong Kong listed companies, there are green bonds, and a whole gamut of investments that you need to ESG accredit,” said Hewett.
“We use this tool because there just aren't enough ESG professionals and experts in China to do all this work and to rank, index, and accredit the ESG rating of these different companies,” he said.
Additionally, Ping An utilises formal disclosures, social media monitoring, and even satellite technology for assessments.
NET ZERO GOALS
China has publicly set an ambitious target of achieving net-zero carbon emissions by 2060.
Addressing the challenge of achieving zero emissions, Hewett mentioned China's progress in renewable energy capacity, with installed capacity for new renewables surpassing thermal energy for the first time.
“I think it was 228 gigawatts of energy that's available in solar, something like 310 gigawatts in wind power, and they're projected to take that through to 1,200 gigawatts before the target date of 2030,” said Hewett.
However, with 56% of energy consumption still coming from thermal sources, there is a long way to go.
“China's planned capacity installations will likely help them achieve peak carbon emissions by 2030, but the 2060 target remains uncertain due to the complexity of modelling over such a long period,” he said.
AsianInvestor will be hosting its Insurance Investment Briefing Singapore on Sept 27, which will bring together a select group of insurance companies. For more details, click here.