[Blue Lotus Flagship Research]: Dig in the F: An ESG survey of Chinese New Economy

 2021-05-13

(11 Pages, 12 graphs and tables)
Listen to analyst’s audio summary

  • We built an ESG framework and surveyed leading Chinese New Economy Companies in breadth of disclosure and carbon emission;
  • On balance, we found Tencent>BABA, BIDU>TCOM, Meituan>PDD and JD>BABA in terms of ESG disclosure and carbon emission;
  • We found HKEX’s mandatory ESG disclosure to be a main driver towards disclosure and compliance. We also found Chinese New Economy Companies to be lagging behind their US peers in carbon.
Tencent is the best, BABA lags behind
Tencent not only had the longest history of ESG reporting and richest details of Greenhouse Gas (GHG) emission, it also managed to reduce GHG per revenue continuously despite the addition of the cloud business. On the contrary, BABA retracted from early ESG reporting in 2018 and did not provide numeric values. Among newly listed companies, Meituan disclosed more than PDD. Among companies with long listing histories, BIDU performed better than TCOM in ESG.
 
Listing domicile plays an important role
We found HK listed or HK/US dual listed companies had better ESG disclosure than US listed companies. We believe this is due to HKEX has inserted mandatory and comply-or-explained ESG disclosure in Appendix 27 of mainboard listing requirement since July 2020. 
 
Chinese New Economy lags behind US peers
Not only were GOOG and AAPL emitted ~1/5 of GHG per revenue of BIDU and Xiaomi, they also disclose ecosystem emissions (Scope 3), of which none of the Chinese New Economy Companies do. Cloud business emits 4x more GHG, which explains why Tencent emitted more than FB.  Further, all US New Economy Companies managed to decrease their GHG per revenue over time but the same trend was not observed in Chinese New Economy Companies.

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