Zhang Junjie, Professor of Environmental Science and Policy, Duke Kunshan University
ESG essentially helps businesses identify risks and opportunities in environmental, social, and corporate governance. As a result, ESG disclosures reflect strong industry characteristics, with risks and returns varying significantly across different sectors.
Taking the power industry as an example, thermal power sector may encounter significant risks in the transition process prompted by tightening climate policies. However, within these risks lie opportunities, such as the expansion of renewable energy sources, implementation of smart grid technologies, and development of electric vehicles. Meanwhile, for companies in agriculture-related sectors, the primary risk stems from climate-related issues. Both long-term climate change and extreme weather events can pose challenges to production, supply chain stability, and market expansion. Thus, it is essential to consider to what extent information in ESG disclosure will influence the company and the whole society.
If we can demonstrate that investment in ESG helps businesses improve their operational performance, aligning shareholder interests with those of other stakeholders, then debates over whether to prioritize ESG will no longer occur.