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Asia shows leadership in ESG
The Asset Corporate Awards 2016
Asset Benchmark Research 15 Dec 2016
There are, broadly speaking, two kinds of companies. There are those that operate in a bubble focussing only on the interests of their shareholders. Their goal is to win market share and boost their profitability at almost any price. Companies in this category do no more to protect the environment and contribute to society than the regulations dictate (though some will try to dodge their statutory obligations by subterfuge and deceit). These are the attitudes and actions of the 20th century (and earlier) when the world’s resources appeared abundant. This hard-nosed ethos prevailed when it was considered an irrefutable fact that the proceeds of corporate success would trickle down to those less fortunate.
 
The second category of company is more a product of the 21st century when scientific evidence of the fragility of the environment is stark, convincing and generally accepted. As the third millennium gathers pace, it is clear that trickle-down economics has its limitations. As a result, the leading companies of the 21st century are recognizing their responsibilities and – in the most exemplary cases – they are actually playing an advocacy role pushing governments to strengthen their resolve and implement policies.
 
In response to Donald Trump’s assertion that climate change is a hoax, over 360 companies and investors urged the US president-elect to maintain the United States’ commitments to the Paris agreement to reduce carbon emissions. The companies, calling themselves the 360+ group, which includes household names such as Nike, Hilton, Kellogg and Starbucks, said in a joint statement in November: “Failure to build a low-carbon economy puts American prosperity at risk. But the right action now will create jobs and boost US competitiveness.”
 
“Implementing the Paris Climate Agreement will enable and encourage businesses and investors to turn the billions of dollars in existing low-carbon investments into the trillions of dollars the world needs to bring clean energy prosperity to all,” the group said.
 
The motivation has an element of self-interest. Environmental disasters are extremely costly as the Deepwater Horizon oil spill and many other man-made and natural catastrophes have shown. Kevin Rabinovitch, global sustainability director at Mars, which has pledged to eliminate 100 percent of its greenhouse gas emissions from its factories and offices by 2040 was quoted as saying: “We’re doing this because we see a real business risk. We see a real business problem.”
 
It will be interesting to see how long the 360+ group’s resolve holds and whether Trump is as bad for the environment as his detractors fear. But in many respects, Asia decoupled from the US some years ago and has its own motivation for pursuing bold environmental, social and governance (ESG) objectives.
 
First and foremost, Asian populations do not want polluted water, toxic air and poisoned soil any more than do their Western counterparts. Legislators across the region recognize the political risk of being lax towards the corporate community with regard to safeguarding the environment. Secondly, as climate change delivers yet more violent weather events, there is increasing acceptance that further damage to the environment must be curtailed.
 
Corporate charitable work is not a new phenomenon in the region. Apart from the social and/or religious motivation, there is a taxation incentive in making charitable donations. But nonetheless, it is clear that corporates are taking their social responsibilities more seriously. CSR policy is included in the board strategies of 86% of South and Southeast Asian companies polled by Asset Benchmark Research, 91% of Hong Kong and 92% of North Asian companies. Only a year ago, the range was between 70% and 82%.
 
They are backing their commitment up by appointing a board member with a special remit for it. This is particularly evident in South and Southeast Asia where 86% of companies applying for awards said a board member held CSR responsibilities, which represents a significant gain from only 75% in 2015.
 
Evidence that companies are serious about reducing their impact on the environment is even more striking. In just 12 months, the proportion of companies that calculate and register GHG emissions, savings and offsets has increased dramatically from 68% to 87% in Hong Kong, 65% to 76% in South and Southeast Asia and from 70% to 100% in North Asia.
 
Platinum a noble element
This year, The Asset’s Corporate Awards drew an impressive array of applicants. In the Platinum category, there are 36 winners, 27 of which were also awardees in 2015. Of these standout companies, nine are in banking and finance from China, Taiwan, Thailand, Malaysia, and the Philippines. Four are from the oil and gas sector in Thailand and China. There are four property companies, six from the telecoms sector and the remainder from an array of industries including petrochemicals, technology and shipping.
 
The Platinum winners must demonstrate a competent management team with good corporate governance and functional transparency to stakeholders. They are required to demonstrate a steady track record in financial management, as well as a solid approach to risk management and protocols for dealing with crises. They must have a professional investor relations team to manage the interface between management and the investment community.
 
In addition, one quality these companies share – it is safe to presume – is a pride in their ESG activities and a desire to gain due credit for them. It is to be hoped that this extends beyond ‘virtue signalling’ to a genuine belief in their role as contributors to broader society.
 
Some sectors, such as oil, gas and petrochemicals are more exposed to environmental hazards than service industries like banking and finance. But the submissions showed that every initiative has some value whether it is Bank of Ayudhya’s gold-certified LEED building with a solar rooftop, BDO Unibank’s ban on styrofoam containers or E.SUN Bank’s adoption of the Equator Principles, which seek to ensure that loans will not have negative impact at the social or environmental level.
 
Gold a universal symbol of value
No fewer than 21 companies are being honoured with a gold award for their corporate governance and for excelling in one or more other fields: social responsibility, environmental responsibility and investor relations. Companies are from sectors as diverse as agribusiness, retail, power, mining and banking and finance.
 
Titanium an extremely strong metal
Seven companies win Titanium awards – all for their investor relations activities and four for their corporate governance. Each of the winners has outlined their efforts to provide a dynamic IR service. They all use multiple channels to reach existing and potential investors, as well as analysts and the media. Aside from the traditional AGM, annual reports, roadshows, results briefings and websites, companies are making more use of email and social media for targeted updates. AIMS AMP Capital Industrial REIT Management and Hindustan Unilever both offer results microsites while Hindustan Unilever and CITIC are among those who provide investors with an IR app.
 
Click here to see all the award results.
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