Ping An Receives Best ESG Score Among Mainland China’s Insurance Companies: Here’s What Investors Need To Know

Recently, Sustainalytics, a global ESG rating firm, rated Ping An Insurance (Group) Company of China, Ltd. (HKEx:2318; SSE:601318) and assigned it a “Low ESG Risk” score of 18.3. This was the best score among Mainland China’s insurance companies.

To ESG investors, this may not be surprising as Ping An is very much a pioneer in ESG in China. It is the first Chinese asset owner to have signed Climate Action 100+ (an investor-led initiative to reduce greenhouse emissions) and the United Nations’ Principle of Responsible Investment (UN PRI) (which supports the incorporation of ESG into investment decision-making).

Given that there are multiple ways of reporting ESG metrics, So, what does it mean for Ping An to be a “Low ESG Risk”?

Ping An Is Rated “Low ESG Risk” By Sustainalytics

According to Sustainalytics’ assessment methodology, the ESG Risk Ratings measure the company’s exposure to industry-specific material ESG risks (Exposure) and how well a company is managing these risks (Management).

Ping An’s Exposure is assessed as “Medium” and this takes into account subindustry and company-specific factors such as its business model. Specifically, they highlighted seven material ESG issues that could impact Ping An’s financials and operation results: Corporate Governance, Business Ethics, Human Capital, Data Privacy and Security, ESG Integration-Financials and Resilience. Ping An’s Management is assessed as “Strong” and this includes the assessment of the robustness of the company’s ESG programmes, practices and policies.

Overall, Ping An’s overall overall ESG Risk Rating was 18.3, a “Low ESG Risk” score. Specifically, Sustainalytics gave Ping An a “Negligible” ESG Risk Rating in the areas of Product Governance, ESG Integration-Financials and Resilience. This is the most favourable rating in its five-tiered system from “Negligible” to “Severe”.

Ping An’s Approach To ESG

Ping An’s formal ESG journey started in 2019 when they first started an ESG office and built a formal ESG governance structure. In the same year, they also became the first asset owner signatory of Principles for Responsible Investment (PRI) in China.

As articulated in their sustainability report, Ping An integrates ESG core concepts and standards into enterprise management and builds a sustainable development management system that aligns with business practice. They have also built a clear, transparent ESG governance structure, which allows for continuous improvement in the management of ESG issues and risks. They also integrated ESG theories into the Group’s “251” risk management system. The ESG risk control requirements are integrated into existing comprehensive financial risk management.

Source: Ping An Sustainability Report 2021

How Ping An Identifies ESG Risks

Given its integrative approach, Ping An conducts continuous management monitoring of identified important ESG risks and their “251” risk management system.

Here’s how they assess climate change risks:

Source: Ping An Sustainability Report 2021

Additionally, Ping An also integrates ESG risks into their business model and have adopted special measures to control the ESG risks of insurance products.

Source: Ping An Sustainability Report 2021

Ping An’s Green Finance Goal And 2030 Operational Carbon Neutrality Plan

In 2021, Ping An announced its goal for green finance and its commitment to carbon neutrality in operations by 2030. They aim to achieve the overall target of 400 billion RMB in green investment and green credit and 250 billion RMB in green premium by 2025.

Source: Ping An Sustainability Report 2021

Ping An plans to increase investment in green assets and encourage innovation in the green financial products (such as carbon finance). They would also gradually reduce the loan financing to industries and enterprises of high pollution, high energy consumption, and overcapacity, strengthen the loan review, and reduce the loan size for emission-regulated enterprises while increasing financing support for green enterprises and green projects. This will be done by opening fast-track channels and accelerating loan disbursement process, and providing preferential financial offers in the form of loan interest rate subsidies (subject to local preferential policies). Additionally, Ping An will further diversify its insurance products and services and introduce corresponding preferential policies to green enterprises or green projects. Life insurance, pension, and health insurance subsidiaries would also be actively developed and green personal insurance products or services for corporate or individual clients be promoted.

As of end-2021, Ping An’s green investment and financing totalled 224.58 billion RMB and reached a total scale of 89.81 billion RMB in green banking. Their environmental insurance premium reached 44.57 million RMB.

Ping An Continues To Advocate For ESG In China

Aside from its own company policies, Ping An also advocates for ESG on a broader level. This includes participation in the drafting of China’s first ESG disclosure standard, the “Guidance for Enterprise ESG Disclosure” and sharing its practical experience in ESG.

As ESG considerations continue to grow in importance, the experience that companies like Ping An have in implementing practical and sustainable ESG solutions and policies will be important to seed and grow the future of greener and sustainable investing.

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