ESG Amongst Asian Companies: what is the state of play? TBLI Europe November 2011
Agenda <ul><li>EIRIS Overview </li></ul><ul><li>Drivers of Responsible Investment in Asia </li></ul><ul><li>EIRIS Study –T...
EIRIS   & our Partner network <ul><li>Not-for-profit research organization specializing in  environmental, social and gove...
EIRIS & Emerging Market Research Issues Company Coverage ESG ‘Core’ 300 Large Cap Emerging market companies  researched on...
EIRIS work in Emerging Markets  <ul><li>Asia top 30 with HERI </li></ul><ul><li>EMDP Research Paper and Engagement  </li><...
Pressing ESG Challenges Governments Stock  Exchanges –  Sustainability  & increased Disclosure ‘ Scorecards’ - CDP : Globa...
The Current state of Responsible Business (Asia) <ul><li>What’s in the study? </li></ul><ul><ul><li>Responsible business s...
<ul><li>Key issues examined: </li></ul>Environmental Issues Social-Stakeholder issues Governance Issues Environmental Impa...
Environmental Performance <ul><li>Most likely area for companies to demonstrate strong management strategies </li></ul><ul...
Climate change <ul><li>No companies in Emerging Asia assessed above ‘some progress’ </li></ul><ul><li>No Chinese firms dis...
Health & Safety <ul><li>one quarter of Asian companies demonstrated good health and safety systems </li></ul><ul><li>China...
Human Rights <ul><li>Almost all Asian Companies (90%)had no human rights policy in place (where relevant) </li></ul><ul><l...
A Look Ahead <ul><li>Asian Companies demonstrated far better management of env issues then social issues but considerable ...
Questions? <ul><li>Lisa Hayles </li></ul><ul><li>[email_address] </li></ul><ul><li>Skype: lisa.hayles </li></ul><ul><li>T:...
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Esg among asian companies

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TBLI CONFERENCE™ EUROPE 2011- London - United Kingdom

TBLI CONFERENCE™ is the prime annual global networking and learning event on Environment, Social, Governance (ESG) and Impact Investing.

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  • For those of you unfamiliar with EIRIS, we are non-profit specializing in environmental, social and governance research on publicly listed companies. Our coverage universe of nearly 3000 companies spans Europe, North America and the Asia Pacific region. Our clients range from those who use our research for stock selection or exclusion, to pension funds and other institutional investors applying an engagement or RI overlay. Our aim is to provide investors with a range of environmental and social performance indicators to implement their own responsible investment strategies. In South Korea for example – EIRIS has worked with our local partner Ko-CSR and HERI a thinktank to produce a list of top CSR performers in Asia the East Asia 30 based on a CSR model developed by experts from Korea, China and Japan – the first of its kind and launched in 2010. the latest version of the list will be announced
  • Latest projects EIRIS currently working with the MSE to create the first Mexican sustainability index Current work with the JSE in South Africa Pilot project on 50 large Chinese companies Published paper on CSR trends in 40 large emerging market companies
  • Emerging Markets expansion creates growing environmental problems and thus a desire from emergign market economies for sustainable investments EM countries are most vulnerable to climate change Asia has the highest rate of deforestation – which subjects it to floods and droughts Air pollution caused by burning forests ad well as growth in transport and manufacturing Governments in EM Asia Strong, centralised states where regulation and legislation drives many responses to ESG pressures - Their economies are significantly impacted by ESG issues – also heard at a meeting of Chinese banks earlier this year – much concern with ‘Brand China’ and ensuring that the practices of Chinese firms abroad do not do long-term damage to China’s reputation Concerned @ trade barriers, licence to operate Vital resources becoming scarcer Social Issues Problematic working conditions, Child labour, Product Safety + ensuring ‘social harmony’ Sustainable Stock Exchanges is an initiative aimed at exploring how exchanges can work together with investors, regulators, and companies to enhance corporate transparency, and ultimately performance, on ESG. In the emerging markets, 50 investors with more than USD 1 trillion in assets under management signed up to the ‘Emerging Markets Disclosure Project’s (EMDP) Investor Statement on Corporate ESG Disclosure in Emerging Markets’ in April 2010. This encourages companies to disclose greater ESG-related information. The EMDP, an international initiative launched in 2008, is in its third phase focusing on outreach and engagement with companies operating in Brazil, India, Indonesia, South Korea, and South Africa to promote greater sustainability disclosure.
  • focuses on 786 Asian companies - 56 in China, 122 in Hong Kong, 47 in Singapore, 111 in South Korea and 450 in Japan to assess how well they are addressing key ESG challenges and compares their performance to their European and North American peers. Key ESG impacts, risks and opportunities –identified by the company Why Asia? Achieving some of the strongest rates of economic growth Home to some of the worlds largest and profitable businesses ESG &amp; RI still in its infancy Asia is the world&apos;s largest and most populous continent, with approximately 3.8 billion people, it hosts 60% of the world&apos;s current human population. During the 20th century Asia&apos;s population nearly quadrupled.
  • EIRIS assesses the strategy for managing ESG issues – include details of governance structure, policies and commitments, implementation systems &amp; targets, &amp; scope of reporting Discussed in terms of: Unmanaged Risk Some Progress Good Excellent Unmanaged risk – no evidence of any engagement on the issue Some progress – some positive actions taken by the company – but further steps required to address the issue Good – sufficiently developed approaches to manage the risk Excellent - likely to be using ESG performance to seek competitive advantage (excellent is not used for Biodiversity of Health and Safety performance)
  • in Emerging Asia increasing numbers of companies have environmental management systems certified to ISO 14001 However, Only 5% of the 56 Chinese companies analysed have strong environmental policies in place and just 2% displayed any proof of making progress in this regard. However less than 10% of the Asian companies researched demonstrated good or excellent reporting on environmental issues. One significant gap identified by our research is a failure for companies to adequately report on all key environmental issues. Whilst companies are becoming better at reporting on GHG emissions there is a reluctance to report data for other key areas such as emissions to air water use. And where companies recognize the key issues they often fail to provide quantitative data or report on targets. South Korean companies performed well on general environmental issues and lagged only slightly behind their Japanese peers in terms of environmental performance
  • Performance of EM Asian companies surprising given the range of climate change legislation and initiatives in the region. Other environmental issues including Biodiversity &amp; water management were considered with varying degrees of importance. The vast majority of Asian companies face unmanaged risk in these areas. For example no Asian companies were assessed as good and only a
  • 1. European companies were the best performers with over two thirds of companies demonstrating good health and safety systems. Australasian companies followed closely behind as seen in figure 12. North American companies ranked bottom alongside the Asian region. 2. When looking specifically at the Asian companies, this figure was much lower with only a quarter of companies demonstrating they had good health and safety systems in place. This perhaps reflects the fact that of the ESG drivers in the Asian region, fewer focus on social issues than environmental issues. 3. (where) almost one third of (Japanese) companies were assessed as having good health and safety systems and a further third were assessed as making some progress. By comparison, a quarter of South Korean companies were assessed as good whilst a further quarter showed at least some progress. Companies from Singapore and Hong Kong were ranked third and fourth respectively. China had the lowest percentage of companies managing health and safety risk. Despite this, it was surprising to note that China had the highest percentage of companies making some progress, meaning they were second only to Japan in terms of having the least number of companies with no management systems in this area. However this may be overstating the general Chinese situation given that the companies covered were pre-selected as ones that had embraced some ESG issues.
  • Disappointingly there has been little improvement on companies’ management responses to human rights issues since EIRIS last conducted a study in 2008. Whilst half of the companies considered to be at risk from human rights concerns, only 8% had policies considered good or better Almost all of the Asian companies studied that operate in countries relevant for human rights concerns had no human rights policies in place. And more often than not, the companies that did have polices often failed to address all of the core ILO areas The vast majority of Australasian and North American companies also had unaddressed risk in this area. Whilst European companies performed comparatively better, they too face significant unmanaged risk.
  • Esg among asian companies

    1. 1. ESG Amongst Asian Companies: what is the state of play? TBLI Europe November 2011
    2. 2. Agenda <ul><li>EIRIS Overview </li></ul><ul><li>Drivers of Responsible Investment in Asia </li></ul><ul><li>EIRIS Study –The State of Responsible Business (Asia) </li></ul><ul><li>A look Ahead </li></ul>
    3. 3. EIRIS & our Partner network <ul><li>Not-for-profit research organization specializing in environmental, social and governance research on publicly listed corporations </li></ul><ul><li>28 years experience in SRI </li></ul><ul><li>Extensive coverage of @ 3,000 companies worldwide, and 7,000 companies on selected criteria. </li></ul><ul><li>Offices in London, Boston & Paris with partners in Cape Town, Seoul, Mexico City, Canberra, Hanover, Madrid & Tel Aviv </li></ul>
    4. 4. EIRIS & Emerging Market Research Issues Company Coverage ESG ‘Core’ 300 Large Cap Emerging market companies researched on ‘Core’ environmental, social and governance issues Compliance with International norms Emerging Markets 700+ (Large and mid-cap stocks) ESG news monitor & Controversial Weapons Wider Universe (up to 9,000 companies or custom portfolio reviews)
    5. 5. EIRIS work in Emerging Markets <ul><li>Asia top 30 with HERI </li></ul><ul><li>EMDP Research Paper and Engagement </li></ul><ul><li>Sustainable Stock Exchanges Initiative </li></ul><ul><li>JSE – SRI Index </li></ul><ul><li>MSE – Sustainability Index </li></ul>
    6. 6. Pressing ESG Challenges Governments Stock Exchanges – Sustainability & increased Disclosure ‘ Scorecards’ - CDP : Global Investor demand UNPRI, ICGN Drivers for RI in Emerging Asia
    7. 7. The Current state of Responsible Business (Asia) <ul><li>What’s in the study? </li></ul><ul><ul><li>Responsible business snapshot </li></ul></ul><ul><ul><li>FTSE All World Developed Index (+ 50 Chinese companies) </li></ul></ul><ul><ul><li>Progress report </li></ul></ul>
    8. 8. <ul><li>Key issues examined: </li></ul>Environmental Issues Social-Stakeholder issues Governance Issues Environmental Impact HR & Labour Risk exposure ‘ Core’ governance Management Systems Human Rights Bribery Climate Change Supply Chain Issues
    9. 9. Environmental Performance <ul><li>Most likely area for companies to demonstrate strong management strategies </li></ul><ul><li>KPIs include GHG emissions and Water use </li></ul>
    10. 10. Climate change <ul><li>No companies in Emerging Asia assessed above ‘some progress’ </li></ul><ul><li>No Chinese firms disclose any strategy on Climate Change management – worrying as we focused on the most transparent firms! </li></ul>
    11. 11. Health & Safety <ul><li>one quarter of Asian companies demonstrated good health and safety systems </li></ul><ul><li>China had the lowest percentage of companies managing their risk but had the highest percentage of companies making ‘some progress’ </li></ul>
    12. 12. Human Rights <ul><li>Almost all Asian Companies (90%)had no human rights policy in place (where relevant) </li></ul><ul><li>Pressures driving western firms to address Human rights and their supply chain not as powerful in Asia (civil society) </li></ul>
    13. 13. A Look Ahead <ul><li>Asian Companies demonstrated far better management of env issues then social issues but considerable room for improvement across the board </li></ul><ul><li>Biggest drivers of ESG in Asia will continue to come from: </li></ul><ul><ul><li>Increased pressure from regulation and policy-makers (governments) </li></ul></ul><ul><ul><li>development of sustainable indices </li></ul></ul><ul><ul><li>greater reporting requirements </li></ul></ul><ul><ul><li>Investor demand is a weak but a growing driver </li></ul></ul>
    14. 14. Questions? <ul><li>Lisa Hayles </li></ul><ul><li>[email_address] </li></ul><ul><li>Skype: lisa.hayles </li></ul><ul><li>T: 207 840-5727 </li></ul><ul><li>M: 07725594513 </li></ul>
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