Identifying Commonalities in ESG Values

Seeking common ground is essential for coexistence. Grasping commonalities in ESG values is key to reaching consensus and helping all parties understand their differences.

Whether in developed countries or developing countries, enterprises have to pay attention to ESG issues such as biodiversity, demographic changes, and data privacy protection. In the context of a shared future for humanity, it is necessary for value chain partners to identify which opportunities and risks related to ESG issues are common among countries and which ones are distinct.

Taking biodiversity as an example, enterprises in any country rely on a healthy ecosystem to sustain people's lives and economic activities. Addressing biodiversity risks requires international cooperation. For instance, mangroves play a crucial role in maintaining biodiversity, and international cooperation in this regard has been instrumental. During the 14th Meeting of the Conference of the Contracting Parties to the Ramsar Convention on Wetlands (COP14) in 2022, China announced the establishment of the world's first International Mangrove Centre in Shenzhen. The positive actions, open minds and cooperative attitudes in the international community toward mangrove conservation exemplify the international commonality of ESG, setting a good example of international exchanges and cooperation.

In addition to specific issues, both domestic and foreign companies can integrate ESG concepts into practical enterprise management and continuously explore the balance between commercial, environmental, and social values to maximize value.

Currently, there are several questions raised in the ESG sector. First, whether the value generated by ESG initiatives only benefits society without enhancing shareholder rights and interests. Second, how to measure and quantify environmental and social value in monetary terms to generate data that can be compared with business value directly. Third, whether capital market participants should be the ones realizing the value of ESG initiatives in enterprises. These three issues reflect the qualitative, quantitative and value realization challenges in balancing business, environmental and social values.

These unresolved issues pose obstacles to the promotion and embedding of ESG in business. However, these questions encourage businesses to think critically about how to realize the true value of ESG, enabling them to make operational decisions that balance present and future sustainable development. Ultimately, enterprises "vote with their feet" through their business operations, which will influence the direction of ESG regulation and standard setting. The value of risk management has gained recognition both domestically and internationally, and both regulatory and industry standards have recognized the value of managing environmental and social risk. For example, the World Business Council for Sustainable Development released “Enterprise Risk Management: Applying Enterprise Risk Management to Environmental, Social and Governance-related Risks” in 2018, which helps businesses apply ESG to enterprise risk management (ERM). The China Banking and Insurance Regulatory Commission published the “Green Finance Guidelines for Banking and Insurance Industries” in 2022, requiring banking and insurance institutions to "incorporate environmental, social, and governance requirements into management processes and comprehensive risk management systems".

Keep reading the article in the following sections 

- Part 1: Richard Sheng, Ping An Secretary of the Board of Directors: The "Global Perspectives, Chinese Approach" to ESG

- Part 2: Recognizing the Differences in ESG Regulations Around the World

- Part 4: ESG Practice and Reflective from Ping An 

This article was published in the 16th edition of the "Peking University Finance Review."