Moody's eyes China's ESG sector

The People's Bank of China, the central bank, has developed standards, fostering disclosure and transparency of environmental-friendly finance since 2016. The move has helped to promote ESG integration into investments and business decisions.

Some experts said the government is promoting national standards for ESG information disclosure for listed companies and bond issuers. Related policies are to be released soon.

"For investors, the provision of information on how firms are incorporating ESG principles is a necessary step to incentivize firms to change, but sufficient for adequate differentiation. So policy action is still needed to incentivize firms to ... reduce negative externalities, especially from climate change-related risks," the IMF said.

Firms may choose to become more ESG-friendly because the cost of meeting regulatory requirements could make delayed compliance expensive, it added.

As Chinese A shares have been included in the MSCI benchmark indexes, the ESG criteria has become more important to evaluate Chinese listed companies. A report from the global index compiler said 11 percent of Chinese companies scored higher on ESG criteria over the past year.

The inclusion into the global benchmark indexes is positive for ESG awareness and adoption among listed Chinese companies and the ESG market development in China should encourage listed firms to implement and raise ESG standards.

A market with a higher level of ESG execution and information disclosure by listed companies will be more attractive for foreign investors. The external expectations and internal demand for a shift in the development model from speed to high-quality will boost the development of ESG in China, said Shi.

Stringent domestic regulations and greater importance Chinese companies attach to environmental protection, social responsibility and corporate governance can improve the ranking of Chinese companies, said Wang Xiaoshu, senior analyst with MSCI ESG Research.

SynTao Green Finance was the first Chinese signatory to the UN Principles for Responsible Investment as a service provider and the first Climate Bonds Initiative Approved Verifier in China. It is also the sole Chinese green bond verifier within the advisory council of Green Bond/Social Bond Principles by the International Capital Markets Association.

"In consideration of both global ESG standards and China's specialized market characteristics, SynTao Green Finance has developed effective ESG methodologies dedicated to China and has accumulated a substantial amount of data," SynTao Green Finance Chairman Guo Peiyuan said.

"Moody's investment will help SynTao Green Finance accelerate its data coverage, adoption and ability to further serve Chinese market participants," said Guo.

Moody's research showed that in the first three quarters of 2019, the global green bond market hit a record high issuance of $190 billion. The issuance is 67 percent higher than the same period in 2018. Full year issuance in 2019 is expected to exceed $250 billion, the ratings agency said.