Big Gaps Found in Climate Risk Disclosures in China

Companies Need to Improve the Breadth and Depth of Climate Reporting

HONG KONG and SHANGHAI, Sept. 24, 2020 /PRNewswire/ -- Ping An Insurance (Group) Company of China, Ltd. (hereafter "Ping An" or the "Group", HKEX: 02318; SSE: 601318) announced today that the Ping An Digital Economic Research Center and OneConnect in collaboration with Imperial College London released a new report that used natural language processing (NLP) techniques to assess the current state of climate risk disclosures among the largest companies in China and the United States. The report found that Chinese companies in the CSI 300 lag significantly behind their global peers in the S&P 500 in climate risk disclosures and need to work towards wider adoption to catch up.

The report, "Where we stand on climate disclosures and why we need them", applied NLP techniques to analyze 277 documents for climate risk disclosures from 182 companies between July 2019 and July 2020. The tool could enable investors to gauge the quality of companies' climate disclosures in a scalable fashion.

The report calls for tighter links between climate risk exposures and financial performance and adoption of more forward-looking information in truthful, transparent, and communicable disclosures, with the help of scalable technology tools to automatically assess disclosure quality.

Overview

Despite companies increasing adoption of climate disclosure frameworks such as the international Task Force on Climate-related Financial Disclosures (TCFD), there is wide variation in the adoption of specific recommendations. The report found:

1. Japanese companies have the highest incidence of discussions of climate risks in their sustainability reports, followed closely by European and US companies. Chinese companies lag significantly behind their global peers.

• Among the four major equity indices examined, including the CSI 300, S&P 500, EURO STOXX 50, and Nikkei 225, Japanese companies lead in terms of incidence of climate risk discussions. Fifty-two percent of companies in the Nikkei 225, which represents 68% of market capitalization, discuss climate risks in their company reports. Forty percent of EURO STOXX 50 companies, representing 44% of market capitalization, and 33% of S&P 500 companies, representing 53% of market capitalization, do so.
• Chinese companies in the CSI 300 index significantly lag behind. Only 3% of companies, representing 13% of market capitalization, currently discuss climate risks in their sustainability reports.