Potential homebuyers check housing models at a real estate agency in Huaian, Jiangsu province, in June. (ZHAO QIRUI / FOR CHINA DAILY)

The extent of reporting on environmental, social, and corporate governance criteria varies in dozens of Chinese mainland real estate companies, a survey by a leading global asset manager has found.

Schroders reached out to 50 real estate developers involved in housing in the Chinese mainland in a survey related to ESG in Asian real estate credit. It was aimed at building a picture of more standardized quantitative data (measures of values) on ESG. Another aim was to help companies to improve their disclosure on material ESG data points and to engage with them on sustainability issues.

The survey was aimed to collect material ESG data points and in the process encourage companies to improve disclosure on material ESG data points and engage companies in ongoing dialogues on sustainability issues.

Raymond Chia, head of credit research, Asia, at Schroders

ESG data, such as that on the use of water and electricity by companies, can measure how their operations affect the world. The data enables compliant companies to create value beyond their financials.

“ESG reports from many real estate companies do not include details that are quantitative and where they do, the scope of what’s reported varies. For example, one firm might report on 80 percent of its properties within certain regions [where the developers’ projects are based] for safety factors, but only 30 percent when it comes to the environment,” said Raymond Chia, head of credit research, Asia, at Schroders.

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He said the ESG survey questionnaire was developed based on topics that are  important to stakeholders in the real estate sector, and tailored to Asia, excluding Japan. For example, Chia notes, that construction safety remains a risk that is not always well managed in Asia compared with real estate markets in the United States or developed Europe.

“The survey was aimed to collect material ESG data points and in the process encourage companies to improve disclosure on material ESG data points and engage companies in ongoing dialogues on sustainability issues,” Chia said. “As a large manager of capital, we engage with companies, helping them to evolve and drive positive change.”

Schroders found that real estate developers now account for a large part of Asia’s credit markets, particularly at the riskier end of the spectrum. Companies rated high yield, BB or lower – investment grade being BBB or higher – are often smaller, have higher levels of debt, and sometimes, lower standards of governance. Asian corporate bond investors can’t ignore this sector, but it requires caution, Chia said.  

Chia noted that in Asian investment grade (US dollar-denominated) credit, real estate has increased from under 3 percent of the US dollar-denominated Asian Credit Indices in August 2000, to almost 9 percent at present. In high yield, however, real estate accounts for over 50 percent of the index, having not even featured in 2000.

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In real estate, Schroders has found that transparency and standardization in ESG reporting and information is broadly lacking, and this needs to be addressed to enable a thorough and effective analysis to help make better, informed investment decisions.

In the wake of the survey, Schroders said it found that nearly all participants have or plan to publish an annual sustainable report, and are also working to develop an ESG framework and or targets.

bandara@chinadailyhk.com