The inclusion of large companies with low-risk exposure 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 instance, insurance company AIA Group, the biggest name within the benchmark, has established an ESG committee including several senior executives. The company also conducts 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 levels of emissions.
Morningstar measures a portfolio’s carbon footprint by aggregating each listed company’s total greenhouse gas emissions per millions of 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, the research found.
For example, although electricity provider CLP Holdings generates 57% and 18% of its power from coal and gas plants, only 35% of its operating earnings originate from these sources. The company also has a high level of certification in relevant safety and environmental standards and made significant investments in renewable power in recent years, said Morningstar.
In sharp contrast, mainland Chia, the world’s biggest carbon emitter, fell into the fourth quintile in the carbon intensity equity markets’ ranking from the second quintile last year, ranking 39th out of 48 markets.
This is mainly blamed on internet giants Tencent and Alibaba, which have been accused of violating anti-monopoly rules, anti-trust laws, and money laundering.
The country also landed in the fourth quintile in terms of carbon intensity, as automobile manufacturer BYD, largest restaurant chain Yum China, China Petroleum & Chemical, and China Shenhua Energy show “meaningful” levels of carbon emissions.