CLSA scores companies on green awareness

Many Asian companies are still oblivious to climate change issues, but CLSA says awareness will eventually evolve in the same way as it has for labour issues.
CLSA has been releasing its corporate governance report on Asia annually since October 2000. A major change in this yearÆs report is the inclusion of a corporate governance score on a companyÆs sensitivity to environmental issues, particularly to climate change.

The so-called Clean and Green score, which replaces a previous social and environmental category, carries a 10% weight on a companyÆs overall corporate governance score.

The CLSA report shows that Asian companies generally seem unaware of pressing environmental issues and the risks involved.

Around 42% of 582 companies polled by CLSA in July and August didnÆt respond to the Clean and Green portion of the survey. Their reason? Since they were not involved in sectors typically associated with environmental pollutants, they felt the survey didnÆt apply to them.

ôIt has not yet sunk in for most corporate managers in Asia that whatever business one is in, it will have a carbon footprint,ö writes Amar Gill, head of thematic research at CLSA, in the firmÆs latest report which is still the most comprehensive in the region.

ôEvery business consumes electricity, involves travel and will have other impacts on the environment, including paper usage. With a carbon footprint comes the responsibility to minimise, if not actually negate the cost of carbon emissions,ö he adds.

Around 64% of the respondents, including those who skipped that part of the survey, received a score of zero in CLSAÆs Clean and Green criteria.

Gill notes that most investors show interest in corporate governance because they want to make sure their returns are not undermined by controlling shareholders or management. But CLSA has a broader definition of corporate governance.

ôWe see corporate governance as about how a firm is run beyond just its financial bottom-line,ö says Gill.

ôGovernance, in our view, goes far beyond that. It seems implausible to say that a company has good governance just because it displays satisfactory financial data and shares the returns equitably with all investors, irrespective of whether the corporation is reckless with regard to social and environmental issues,ö he adds.

Gill believes a change in mindset will occur. He notes that 10 years ago, the concept of corporate governance was not even discussed, but it has now become integral in corporate presentations and annual reports of most Asian companies. He envisions the same thing happening with regard to the companiesÆ response to climate change.

The response rate to the CLSA survey shows that companies in certain countries are more aware of environmental issues than others.

CLSA received a higher response rate from companies in India, Thailand, the Philippines, and South Korea. The results are more credible in India and South Korea, where more than 70 companies were surveyed in each country. The high response from Thailand and the Philippines isnÆt as meaningful because of the low samples there.

The lowest response rate came from Indonesia, which isnÆt a surprise because it is ranked as one of the largest carbon polluters in the world through deforestation.

Response from China and Hong Kong was also poor, with many of the companies there surprisingly citing a lack of awareness of the issues û which is ôalarmingö especially for the Mainland where the economy is expanding rapidly due in large part to industrial growth, Gill says.

In the Clean and Green part of the survey, companies were asked 20 questions, including whether they are aware of government regulations that require them to monitor greenhouse gas emissions, whether they were using renewable energy sources, and whether their recent annual report contains any comments on the risks or rewards of climate change to the business.

Out of the 336 respondents to the Clean and Green part of the survey, only 30 companies received a score of 80 and higher out of a perfect score of 100. Following are those 30 companies, with their country of origin, sector, and Clean and green ranking:

Samsung SDI - Korea - Technology - 100
HSBC - Hong Kong - Financial services - 95
NEC - Japan - Technology - 95
Posco - Korea - Materials - 95
Sharp - Japan - Technology - 95
Toyota Motor - Japan - Automotive - 95
Zyxel - Taiwan - Technology - 95
Cathay - Hong Kong - Financial services - 90
China Steel - Taiwan - Materials - 90
Fuji Film - Japan - Technology - 90
Hynix Semiconductor - Korea - Technology - 90
Nanya Plastics - Taiwan - Petrochemicals - 90
Standard Chartered - Hong Kong - Financial services - 90
Taiwan Cement - Taiwan - Materials - 90
United Microelectronics - Taiwan - Technology - 90
Asahi Glass - Japan - Materials - 85
Astra International - Indonesia - Conglomerates - 85
CLP - Hong Kong - Power and gas - 85
Kia Motors - Korea - Automotive - 85
Kumho Tire - Korea - Automotive - 85
NTT DoCoMo - Japan - Telecoms - 85
Siam Cement - Thailand - Materials - 85
Aromatics Thailand - Thailand - Petrochemicals - 80
Ibiden - Japan - Technology - 80
Millea - Japan - Financial services - 80
Nanya Printed Circuit Board - Taiwan - Technology - 80
PTTEP - Thailand - Petrochemicals - 80
Shin-Etsu Chemical - Japan - Materials - 80
Taiwan Semiconductor - Taiwan - Technology - 80
Thai Oil - Thailand - Petrochemicals - 80

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