by Palle Ellemann, Client Manager and Lead Emerging Market Engagement at GES
”Welcome to Beijing!”, my Chinese colleague says. She gives me a gift, it is a mask for protection against the massive air pollution in the city. Fortunately, the air quality is relatively good these days, so we don’t end up using the masks, but it reminds me about why we are travelling around the world to discuss sustainability issues.
China has very significant environmental issues, not just air pollution, but also water quality and soil pollution. The central government is very aware of the problems and try to balance the population’s demand for economic growth with necessary means to mitigate the environmental challenges. China has made significant commitments for carbon emission management in the Paris agreement and the aggressive strategies seem to yield results already, also helped by a slower growth total carbon emissions seem to peak these years. Next year, a new carbon emission trading scheme will be implemented. These are all important measures to mitigate some of the environmental problems that are jeopardising the sustainability of the Chinese growth model on a macro level, but these are also key factors for investors when they are considering investments in specific China-based companies. Companies with poor environmental performance in high risk industries run the risk of negative attention from Beijing, which can lead to cutting off the line of credit or investments, force them to reduce or relocate operations or flatly being closed down.
Besides various meetings with SOEs (State-Owned Enterprises) and privately owned companies, we also met with an environmental NGO based in Beijing. Among other things this NGO had built an app where people can follow air and water quality emissions in real time for thousands of factories and other high-emitting companies – this reporting is required by the central government. The emissions are tracked against the emission levels allowed by regulation and the NGO can document more than 50,000 violations of the emission and water quality standards per year! The numbers show that there is still work to do to ensure clean air and water, but the improved transparency is a first important step to making the companies accountable.