Taiwan-listed companies outshine Hong Kong, mainland China peers on ESG disclosures, MioTech data shows

·4-min read

When it comes to disclosing what they are doing to help the environment and society at large, Taiwan-listed companies are outshining their peers in Hong Kong and mainland China, according to data provider MioTech.

They are better at reporting their environmental, social and governance (ESG) efforts than their regional counterparts, though Hong Kong and mainland-listed firms have been improving on the back of tighter regulatory requirements and the rising expectations of investors, said the Hong Kong-based sustainability data and technology firm.

“Although our data suggests that Taiwan companies have higher disclosure levels as compared to their Hong Kong and mainland peers, there is a clear upwards trend for the entire Greater China region,” the company said in written comments to the Post.

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“Top performing Taiwan companies are diligent in disclosing their ESG metrics and initiatives against international standards like GRI [Global Reporting Initiative], which are more in-depth as compared to Hong Kong Exchanges and Clearing’s requirements.”

Companies that make more comprehensive disclosures can achieve better scores than those that do not, under MioTech’s assessment methodology.

Set up in 2016, MioTech uses artificial intelligence to gather and assess its data.

It said it was able to collect 30 to 50 per cent more quantitative and qualitative data from Taiwan’s top 10 performers compared to Hong Kong’s top 10.

The average overall ESG score of the top 25 performers – among more than 8,000 listed firms covered by MioTech in the region – was 86 as of June 30. All but one – Hong Kong-based power utility CLP Holdings – are listed in Taiwan.

This compared with an average score of 79.5 for the 25 highest-ranked Hong Kong-listed firms.

Higher ESG ratings can help companies achieve higher stock market valuations and reduce capital market financing costs, studies by investment analysts and universities have shown.

Some 19 of 26 ESG-focused exchange-traded funds outperformed the S&P 500 Index in the 12 months since March 5, 2020, shortly before Covid-19 was declared a pandemic, S&P Global Ratings said in a report last month.

Among companies either publicly traded in Hong Kong or mainland China, the top 25 performers rated by MioTech included three that are traded on both bourses, besides one that is listed in Shanghai only.

Although ESG disclosures are encouraged but not mandatory on the mainland, over the past four years companies listed there have steadily improved their disclosure levels by at least 10 per cent year on year, MioTech noted.

Compared to 2018, mainland-listed companies recorded a 21 per cent increase, while Hong Kong companies saw a 56 per cent rise in total disclosed ESG metrics for their 2019 social responsibility reports, it added.

Under Hong Kong’s listing rules, it has been mandatory since 2017 for companies to disclose certain ESG information, failing which they must offer an explanation in their annual reports.

The China Securities and Regulatory Commission closed a consultation on June 7 on draft revisions to listed companies’ disclosures.

Companies are also encouraged to voluntarily disclose measures they have taken to cut carbon emissions.

“The rise of ESG signifies a paradigm shift of social value from gross domestic product-centric to sustainable development, and it will have significant long-term implications for financial valuations,” MioTech’s CEO Jason Tu said. “As the world starts to get mobilised post-pandemic and new regulations start to rein in, companies in Greater China should embrace ESG as early as possible to better collaborate and compete with global peers.”

MioTech’s investors include ratings agency Moody’s, banking giant HSBC and Beijing-based venture capital fund ZhenFund, besides tycoon Li Ka-shing’s private investment arm Horizons Ventures and TOM Group – a media unit he controls.

The ESG data and ratings industry is likely to see some consolidation given many general and specialist data providers have been launched globally in recent years, said Gabriel Wilson-Otto, director, sustainability investing at Fidelity International.

“But we don’t expect them to consolidate to the extent of the credit agencies because there are more objectives in ESG ratings such as impact, risks and opportunities and alignment with international sustainability goals – not just measuring a company’s default risks,” he said. “So the consolidation could happen around different market niches.”

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