Abstract
An increasing number of companies have embraced ESG, and an increasing number of investors have focused on the ESG impact behind their capital allocation decisions. To date, however, prior academic literature has not distinguished the useful environmental indicators in China A-share market. This study investigates the effect of environmental indicators on the valuation multiples. Using a normalized sample of 222 Chinese companies co-listed in China A-shares and MSCI China Index, it finds that most of the environmental indicators are statistically significant. Total GHG CO2 intensity per sales and percentage of water recycled has significance in determining P/B value. This study also finds that the higher the government involvement, the higher the energy inefficiency and the GHG CO2. These results speak to the significance of environmental factors in company valuation in China A-share market and also have implications for asset managers who have committed to the integration of environmental factors in their capital allocation decisions.
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Notes
- 1.
BP Statistical Review of World Energy 2018.
- 2.
Deutsche Bank: Measuring Physical Climate Risk for Equity Portfolios, 2017.
- 3.
- 4.
The platform is on track to provide company-reported ESG data for almost 9500 companies in 83 countries. It has been broadly used by over 700 reports and one million unique users per month, covering four ESG investment themes including 35 ESG indicators where eleven of them are E factors. The eleven indicators are aimed to measure the direct or indirect impact of a company’s activity on the environment (waste management, level of carbon dioxide emissions, responsible consumption of water, development of renewable energy, degree of energy efficiency are examples).
- 5.
The climate risk we mention here is actually the physical risk as mentioned and measured in the previous paper.
- 6.
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Acknowledgements
We acknowledge our research assistant RUAN, Kaiyue of HKUST 2018, for handling the data and doing the analysis on this research project.
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Appendix 1
Appendix 1
See Table 9.
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Benz-Saliasi, E. (2020). Impact of Climate Risk Factors on Valuations of China A-Share Market. In: Fu, J., Ng, A. (eds) Sustainable Energy and Green Finance for a Low-carbon Economy. Springer, Cham. https://doi.org/10.1007/978-3-030-35411-4_9
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DOI: https://doi.org/10.1007/978-3-030-35411-4_9
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