China & ESG, an oxymoron

Following is AlphaValue take regarding what Covid-19 reveals about current Corporate Social Responsability (CSR) practices.

Most ESG ratings have been assigned on the basis of social and governance ‘standards’ across continents. This does not exist and is a European simplistic vision.  The EU green taxonomy will make that clear (regulation gap). For global companies this is a huge problem that could backfire, as it is impossible to track ESG risk compliance in politically  sensitive areas.

ESG investors and rating firms should be more aware of those limitations and international companies more transparent about their extensive exposure to China (not only sales exposure, but also supply chain networks and their own factories).

We are currently reviewing the social and governance scores of some companies under our coverage with substantial exposure to Asia (or China for the rare specimen which report it).

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