ESG ratings are an important tool for ESG investment. Although the evaluation principles of ESG ratings have not yet been unified and are still debated, the recognition of Wind ESG ratings by domestic investors is gradually increasing. Founded in 1996, Wind is a leading financial information service company, which has been researching ESG standards and frameworks since 2018, upgraded ESG data products in 2020 against domestic and foreign ESG rating methodologies, and officially launched its own brand ESG rating in 2021, which has now covered all A-share and Hong Kong-listed companies.
Wind ESG Ratings focuses more on evaluating a company's ESG performance from the perspective of financial materiality, and is committed to reflecting the company's material ESG risks and ESG management practices. The entire indicator system includes 3 dimensions (environmental, social, and governance), 27 topics, and more than 300 specific evaluation indicators downward, most of which are quantitative indicators. According to the classification standards of 62 Wind Level 3 industries, there are 62 sets of index systems and weight matrices with industry attributes.
Among them, the following indicators have been established for the three-level industry of composite public utilities:
The purpose of this research is to comprehensively review the current status of the WIND ESG rating of A-share listed companies in the composite utilities sub-industry, and put forward reasonable suggestions for the ESG rating improvement of enterprises in this industry.
At present, there are 21 A-share listed companies of composite public utilities, of which 18 are included in the WIND ESG rating, and from the perspective of rating, 1 company has obtained an AA rating, 3 companies have obtained an A rating, 4 companies have obtained a BBB rating, and 10 companies have obtained a BB rating. From the perspective of corporate disclosure of ESG, sustainability or social responsibility reports, 10 companies have published reports on related topics.
This article cites two companies with AA and A ratings as examples, and compares and analyzes the performance of their ESG indicators to gain a comprehensive understanding of the ESG performance benchmark companies in the industry.
Environmental management practice issues
(1) Energy and climate change
From the perspective of energy management systems and systems, goals and plans, climate change management systems and systems, goals and plans. In terms of performance, Luen Mei Holdings has received full marks for energy and climate change, and has systematically monitored and disclosed energy consumption and carbon emissions. Fuchun Environmental Protection has a complete disclosure of its own energy consumption, but has not taken action on climate change.
(2) Environmental management
In terms of environmental management, both companies have established their own environmental management systems and systems, but from the perspective of management practice, Fuchun environmental protection implements well, and in terms of performance, Fuchun environmental protection also has clear disclosure.
(3) Exhaust gas
Fuchun Environmental Protection and Luen Mei Holdings have disclosed their waste gas management systems and systems, and in terms of performance, they have achieved comprehensive information disclosure.
Substantive Topic: Comparison of energy and climate change performance
Practical issues of management in the social dimension
(1) Community
Fuchun Environmental Protection has established a community management system and has the latest management practices in helping community development, and has also invested more in volunteer services and disclosed information.
(2) Development and training
Both companies have invested in the development and training system and system, and Fuchun Environmental Protection is better in terms of "employee training", but in terms of employee training coverage and per capita training time, Luen Mei Holdings' performance is not as good as that of Fuchun Environmental Protection.
(3) Occupational health and safety production
Fuchun Environmental Protection and Luen Mei Holdings have excellent performance in occupational health and safety production management systems and systems, have established emergency plans, and conducted occupational health and safety production training for employees.
Materiality: Comparison of community performance
Governance dimension: management practice issues
(1) Corporate governance
Fuchun Environmental Protection and Luen Mei Holdings have performed well in terms of the number of board members' attendance at the board, attendance rate, and the establishment of risk management committees.
(2) Audit, ESG governance, equity and shareholders
Both companies have performed well in terms of the evaluation opinions of accounting firms, ESG risk management and ESG governance structure, equity and shareholders.
(3) Business ethics
Both companies have established anti-corruption management systems and systems, and supervise anti-corruption and bribery of business partners, as well as anti-monopoly and fair competition management systems and systems.
Materiality: Comparison of corporate governance performance
A detailed review of the current status of WIND ESG ratings for A-share listed companies in the composite utilities sector shows that while the sector has performed well in ESG ratings overall, there is still room for improvement. In particular, most of the 18 companies included in the rating have received good ratings, while 10 companies have publicly released relevant reports, reflecting the industry's emphasis on ESG and sustainability issues.
This paper selects two companies with AA and A ratings as case studies to compare and analyze their ESG indicators. The study found that both companies demonstrated excellent performance in three dimensions: environmental management, social responsibility, and governance practices. For example, in terms of environmental management, Luen Mei Holdings received full marks in energy and climate change performance, while Fuchun Environmental Protection lacked corresponding actions in climate change management. In terms of social dimension, Fuchun Environmental Protection has performed well in community development and employee training, while Luen Mei Holdings has done a better job in the completeness of its disclosed information. In terms of governance, both companies performed well in corporate governance and auditing.
In conclusion, A-share listed companies with composite utilities have performed well in terms of ESG ratings, but there is still potential for improvement. Especially for companies with low ratings, they should start with their own systems, practices and performance, and strengthen information disclosure, especially the disclosure of ESG reports, while focusing on benchmarking and leading enterprises, while finding gaps, so that all stakeholders can have a more comprehensive understanding of the company's ESG practices and improve their ratings.