According to a new study released today by the consultancy SynTao, company incidents in China are most often connected to social issues (65%). Company incidents are significantly less often linked to governance (22%) and environmental (13%) issues. After collecting all news on company incidents between 2010 and 2011, SynTao found that China's biggest environmental, social and governance (ESG) risk is occupational health and safety (over 40% of incidents). “Investors are advised to pay extra attention to companies' occupational health and safety policies,” says Wayne Silby, chairman of SynTao, “Also in China, ESG factors impact stock performance.”
SynTao latest report presents a discussion of China's major environment, social and governance (ESG) risks for 2010-2011, based on the findings of the SynTao local news monitoring system. “This is the first time a research report about the recurrence of ESG issues in China is released,” explains Dr. Guo Peiyuan, SynTao's general manager. After monitoring almost 2.000 listed companies operating in China between 2010 and 2011, SynTao identified 676 separate incidents for over 503 different companies.
Further results of the report show that China's top three ESG issues were: 1) occupational health and safety (41%), 2) corruption and fraud (21%), 3) environment and industrial hazard (13%). China's industries most exposed to ESG risks were found within the secondary economic sector (62%), with the majority of the incidents taking place in the 1) manufacturing industry (55%), 2) mining (12%) and 3) transportation (7%). The top three companies most exposed to ESG risks in China were 1) PetroChina (22 incidents), 2) Sinopec (17 incidents) and 3) Foxconn (15 incidents).
ESG performance has become a proxy of management competence with implications for future cash flows. Considering local Chinese ESG factors can add value to an investment portfolio.