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10/6/2011
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Asian Companies Show Improvement in ESG Reporting
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As sustainable investors increasingly turn their attention to emerging markets, EIRIS finds that environmental, social, and governance (ESG) performance by Asian companies needs improvement.
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SocialFunds.com -- When a report on environmental, social, and governance (ESG) disclosure by companies in emerging markets was published in 2009, Stephen Hine, the Head of International Relations at EIRIS, told SocialFunds.com, "Substantial numbers of investors are interested in expanding their exposure to emerging markets. But in order for them to be able to do that, they are requesting improved ESG disclosure from companies in those markets."
EIRIS has now followed up that report, published by the Emerging Market Disclosure Project (EMD Project), as well as its own 2006 report, with a new study of the State of Responsible Business in Asia. The report's findings suggest that while companies in Japan and South Korea are making progress in addressing ESG challenges, those in Hong Kong, China and Singapore have failed to make significant progress.
As always with reports from EIRIS, analysis is exhaustive, and in the case of its new report EIRIS found that over 2,000 of the world's largest firms have left at least one ESG risk unmanaged. Among Asian companies, the report found, stakeholder concerns over key social issues remain acute, as "90% of Asian companies with operations in countries relevant for human rights concerns have no human rights policies in place."
On the other hand, the report continued, "The vast majority of Australasian and North American companies also had unaddressed risk in this area."
For the most part, Asian companies performed reasonably well on environmental issues, with the report finding that over 40% of companies located in the region are assessed as having good or excellent environmental policies. "Regulation and the rise of environmentally-focused stock exchanges are the reasons why so many Asian companies perform well on environmental issues," the report stated. In contrast, the report pointed out, "Only a quarter of North American companies demonstrated good or excellent environmental policies."
However, despite the presence of good policies, less than 10% of Asian companies report well on environmental issues, largely because most fail to address industry-specific concerns. Quantitative data was often found to be lacking, as was the establishment of emissions reduction targets.
EIRIS concluded that companies based in Asia have to improve their reporting on actual ESG performance to find markets or develop competitive operations in foreign locations. Drivers for such improved performance, the report predicted, will come from increased regulatory pressure, improved reporting requirements, and the further development of sustainable stock market indexes.
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