The inclusion of large companies with low risk and strong management means that Hong Kong has the most sustainable non-European stock market when it comes to corporate-level sustainability, according to the latest Morningstar Sustainability Atlas report.
For example, insurance company AIA Group, the biggest name in the benchmark, has set up an ESG committee comprising several senior executives. The company also organizes training on responsible product offerings and applies internal disclosure standards.
However, Hong Kong is ranked as one of the most carbon intensive stock markets as big names in the Hong Kong benchmark including CK Hutchison Holdings, CLP Holdings, Galaxy Entertainment Group and Power Assets Holdings produce very high emission levels.
Morningstar measures a portfolio’s carbon footprint by aggregating each listed company’s total greenhouse gas emissions per million dollars of revenue on a weighted basis.
Despite being one of the most carbon-intensive markets, Hong Kong companies are managing their carbon risk well, according to the research.
For example, although electricity supplier CLP Holdings generates 57% and 18% of its electricity from coal and gas plants, only 35% of its operating profits come from these sources. The company also has a high level of certification in relevant safety and environmental standards and has made significant investments in renewable energy in recent years, Morningstar said.
In stark contrast, mainland Chia, the world’s largest carbon emitter, fell to the fourth quintile of carbon-intensive stock market rankings from the second quintile last year, ranking 39and in 48 markets.
This is mainly blamed on internet giants Tencent and Alibaba, which have been accused of breaching anti-monopoly rules, anti-trust laws and money laundering.
The country also landed in the fourth quintile in terms of carbon intensity, with automaker BYD, the largest restaurant chain Yum China, China Petroleum & Chemical and China Shenhua Energy posting “significant” levels of carbon emissions.