In a sign that environmental, social and governance (ESG) risks are becoming a greater concern in China, the country’s first ESG index launched in mid-September as a joint venture between the main Shanghai exchange and an Italian research company. The Shanghai Stock Exchange’s research centre director, Professor Ruyin Hu, said the China Securities Index Company (CSI) was working with ECPIT, an Italian company which specialises in sustainability research and ESG index construction. Professor Hu said ESG issues were becoming a greater concern for the Shanghai exchange and this had led to building the new CSI ECPI China ESG 40 Equity Index.
The index followed the recent launches of two exchange-traded funds (ETFs) tracking the corporate governance index and the corporate social responsibility index, Professor Hu, said, and came at a time when MSCI had recently launched a family of more than 20 ESG indexes. Speaking at the annual conference of the Responsible Investment Association of Australasia in Sydney last month, Professor Hu said China was paying more attention to ESG issues. In February 2008, the Ministry of Environmental Protection (MEP) and the China Securities Regulatory Commission (CSRC) launched the Green Securities policy that made it harder for polluters to access capital markets.
Under this policy, enterprises in heavily polluting industries had to be assessed environmentally by MEP before an initial public offering (IPO) or secondary equities offering (SEO). In a separate announcement, Aviva Investors said a coalition of responsible investors would be writing to CEOs of global listing authorities and stock exchanges to demand that sustainability reporting become embedded in listing rules. Aviva’s CEO, Paul Abberley, said that apart from exchanges in Singapore, Johannesburg and Istanbul, the market “has yet to see a serious commitment from stock exchanges to make changes to their listing rules”. An Aviva-commissioned study showed that only 25 per cent of exchanges would consider changing listing rules to mandate ESG inclusions in listings.
