S&P 50 Asia companies have highest carbon neutrality claims, but fare worse on other ESG indicators

COMPANIES in S&P 50 (Asia) were found to have the highest rate of claims in carbon neutrality, a Global ESG Monitor (Gem) report published on Wednesday (Nov 30) found.

However, Asia did not fare as well on other indicators, such as improving gender diversity, setting goals to limit global warming, supply chain transparency, auditing efforts and disclosures on child labour and forced labour.

Gender diversity, for example, was found to be the worst in Asia as compared to the rest of the world. Asia came in last with the least gender diverse management structures, as only 43 per cent of companies had women on their board of directors. The average ratio of women to men in Asian companies was also significantly lower than the rest of the world, at only 20 per cent.

For comparison, Europe had a ratio of at least 50 per cent in its women-to-men gender ratio.

“It is no surprise that the Gem found such a wide difference in reporting transparency in different nations and regions. There is still no uniform, internationally recognised standard in ESG (environmental, social and corporate governance) reporting and this poses challenges for companies,” said Ariane Hofstetter, Gem’s co-founder and head of research and data science.

Furthermore, only about three in 10 companies in Asia aligned with Paris Climate Agreement goals to limit global warming to a maximum of two degrees Celsius.

While 72 per cent of Europe’s Stoxx companies disclosed the risk for incidents of child, forced or compulsory labour in their ESG reporting, only 51 per cent from Asia do so, according to the report.

And it is getting worse.

Researchers found that less than a third, or 27 per cent, of companies in Asia disclosed strategies for preventing forced and child labour, as well as other forms of exploitation.

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These problems in ESG reporting were further exacerbated with the finding that few companies in Asia, as compared with the rest of the world, mandated an auditor when disclosing their financials and other records.

“Even though there is the widespread use of important analysis tools such as materiality assessments, there is still a lot of make-believe and lack of validity and liability in the results,” said Hofstetter.

Gem’s other co-founder, Michael Diegelmann, said while progress is being made in ESG reporting, more needs to be done as these efforts will not go unnoticed by investors and the public.

The Gem 2022 report is a research initiative to examine transparency in non-financial reporting of the world’s largest companies. This year’s report analysed 625 ESG reports from 350 companies included in indices from 10 major stock markets, including those from Europe, the US, Asia, and Australia.