Ping An Insurance to stop financing high pollution industries
The insurance giant is big enough and influential enough to push the boundaries of ESG investing in China
PING An Insurance Group has become the first major Chinese asset owner this year to openly declare that it will stop financing high pollution and high energy consumption industries as part of its efforts to combat climate change and become an active global influencer in environmental, social, and governance (ESG).
The insurance giant’s statement, contained in its 2019 sustainability report released on March 5, is perhaps the boldest statement aimed at addressing climate change made by an asset owner from China which still relies on coal power plants for most of its energy requirements.
“Climate change poses unprecedented new challenges to corporate strategy, finance, operations, human resources, legal compliance and sales,” Ping An declares in the report.
With 8.22 trillion yuan (US$1.2 trillion) in total assets as of December 31 2019, as well as investments in a huge array of businesses, Ping An is big enough and influential enough to push the boundaries of ESG investing in China which accounts for 27% of the world’s greenhouse gas (GHG) emissions, the largest of any country in the world at present.
“We promise that we won’t provide loans, insurance guarantee or other services for high pollution and high-energy consumption industries and those damaging the environment. We are active in supporting the new-energy, and green and environmental industries, to drive the development of clean and green industries,” according to the report.
“Our insurance business, banking and investment subsidiaries are fully carrying out the sustainable insurance strategies and responsible investment strategy. Taking climate change and environmental performance as one of the core considerations for investment decision making, we are prudent in investing the high-pollution and high-energy consumption industries,” Ping An declares.
The declaration to stop financing high pollution and high energy consumption industries becomes more significant when seen in the light of China’s renewed reliance on coal power plants and increased fossil fuelled consumption during the last two years.
According to Climate Action Tracker, an independent think-tank, although there had been hopeful signs that China's CO2 emissions were flattening previously, increased fossil fuel consumption drove an estimated 2.3% increase in Chinese CO2 emissions in 2018 and 4% in the first half of 2019, marking a third year of growth after emissions had appeared to level out between 2014 and 2016.
Exacerbating this deteriorating picture is the fact that China started construction of 28GW of new coal-fired power capacity in 2018 after lifting a previous construction ban, bringing its total coal capacity under construction to 245GW, according to Climate Action Tracker.
“In 2020, we will expand the application of ESG investment across the Group, upgrade the existing responsible investment system, and build up the professional capabilities for relevant investment teams. Ping An aims at becoming a leading responsible investor in China, exploring the global responsible investment market, and also hopes to apply responsible investment approaches to improve its risk management and achieve a stable investment model in the long-run," says Chan Tak Yin, chief investment officer of Ping An Insurance (Group) Company of China, Ltd.
In 2019, Ping An was active in responding to the initiative of the G20 Financial Stability Board (FSB), consisting of major national financial authorities such as finance ministries, central bankers, and international financial bodies, and completed an overall assessment of climate change risks under the framework of the Task Force on Climate-related Financial Disclosure (TCFD).
Ping An became the first asset owner signing the United Nations-supported Principles for Responsible Investment (UNPRI) in China. In 2019, green investment reached 51.24 billion yuan, social and inclusive investment amounted to 903.2 billion yuan, the balance of green credit loans reached 24.27 billion yuan, and the balance of social and inclusive loans amounted to 898.92 billion yuan.
As part of its objective, in 2019, Ping An has provided risks protection for over 1,000 major projects of the Belt and Road Initiative and the development of the Greater Bay Area, served over 3 million small and micro enterprises with integrated financial services such as insurance, loans and financing, and provided over 1 trillion yuan in insurance coverage and financing services for farmers and rural enterprises.
Ping An also made more efforts to develop and provide social security products, inclusive financial products and environmental products under the theme of sustainable development. In achieving a stable growth in its insurance performance, Ping An is committed to providing risk protection for social equity and sustainable development. In 2019, Ping An's sustainable insurance insured amount reached 121.21 trillion yuan.
MSCI upgraded Ping An's ESG rating in 2019. Ping An also became the first insurance company from mainland China to be selected in the 2019 Dow Jones Sustainability Emerging Markets Index. Ping An had also been recognized with a B-level rating in the Carbon Disclosure Project (CDP), which was ranking third among all Chinese companies and first among Chinese financial companies.
Given the recent outbreak of the 2019 novel coronavirus (Covid-19), Ping An has mobilized resources and assisted in the society's efforts to control the epidemic. To date, Ping An had donated up to 61.5 million yuan to fight the epidemic and provided free insurance for 8 million disease control and medical staff members and 15,000 volunteers.
Meanwhile, Ping An had provided an exclusive epidemic relief fund of up to 100 million yuan for public security police and auxiliary police force who were at the frontline of epidemic prevention and control. The fund will also help the forces' families. These efforts are proof of Ping An's commitment towards social contribution as a responsible enterprise.
Richard Sheng, secretary of the board and brand director of Ping An says: "Ping An has been improving its ESG performance to promote its comprehensive value in the capital market. We believe that, supported by excellent ESG management and practice, Ping An will achieve better risk management, seize the opportunities to boost the steady development and demonstrate its capacity of creating long-term value for investors."
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