Alliance News | ESG 2.0 Database Published in WIND Financial Terminal

Recently, CASVI's ESG 2.0 Database was officially published in the WIND Financial Terminal.

The A-Share Listed Company Assessment Model for Sustainable Development Contributions (referred to as Assessment Model fromhereon) is a cross-sector collaboration and a talent crowd-sourcing effort between CASVI and over 200 local and overseas specialists. It consistsof 2 sub-models: Sub-model for Screening and Sub-model for Scoring. It examines the comprehensive economic, social and environmental contributions (ACTION | Transformation Force) created by companies through innovative technologies for production, business operation models and management systems (APPROACH | Innovation Force) for the purpose of building a better future with improved quality, efficiency, justice and sustainability (AIM | Driving Force).

The Assessment Model employs the mechanism of screening, followed by scoring. The Sub-model for Screening is an assessment tool that comes up with a negative list for sustainable development contributions assessment. It makes “yes or no” judgements on the subjects drawing on 17 indicators from 6 aspects (Industrial Issues, Sector Issues, Financial Issues, Major Negative Accidents, Violation of Laws and Regulations, and Special Treatments). If any of the indicators is applicable to a company, the company will lose its eligibility for further quantitative rating.

The Sub-model for Scoring is used to quantify listed companies’ sustainable development contributions. It encompasses 3 tier-one indicators, 9 tier-two indicators, 28 tier-three indicators and 57 tier-four indicators. Indicators for each company were quantified and rated with data from the company’s publicly disclosed information, government authorities and other third-party organizations. For more information, please refer to our Discovering “SV 99” in China - A-share Listed Company SDG Value Assessment Report series available here.

The Database currently includes the total scores of 5 periods of CSI 300 in 4 years (June 2016, June 2017, June 2018 and June 2019), ranking and indicator data for tiers one to three. The Database updates twice a year in June and December, in sync (within 15 working days) with adjustment frequency of CSI 300 constituent companies. With CSI 300 as the sample pool and based onthe quantified assessment from the Assessment Model, factor analysis and 5 yearback-testing was conducted. Analysis results indicate the 3 advantages of this database:

First, the 5-year period back testing results show that the rate of return outperformed CSI 300.

The Sustainable Development 100 Index, basedon the top 100 listed companies with the highest scores, was constructed with weighted circulation market value. Individual sample weighted percentage does not exceed 10%. As shown by back-testing results, the index continues to run higher than CSI 300, and has more stable returns.

We can see from the index characteristics that Sustainable Development 100 is lower than CSI 300 in valuation, has higher dividend yield and profitability.

Second, 5-year period back testing results show that retracement level is better than that of CSI 300. Through benchmarking CSI 100 constituent companies , analysis shows that Sustainable Development 100 constituent companies have higher risk aversion ability. The historical coincidence degree of the constituent companies of Sustainable Development 100 and CSI 100 is about 50 – 60%, but Sustainable Development 100 has better risk aversion compared to CSI 100 at stock picking.

Third, the discovery of non-financial driving factor for excess rate of return.

During factor analysis, it is found that the single indicators in the Assessment Model, which are non-financial driving factors for excess rate of return, can be integrated into investment strategy to be an effective indicator for selecting investment targets. Taking non-financial driving factor “Green Growth” as an example, between June 30 2014 and July 1 2019, the performance of CSI 300 High Scoring Green Growth group is significantly better than the groups with Low or No Scoring. At the same time, High Scoring Green Growth group also outperformed CSI 300 in terms of total return index in back-testing, while the Low Scoring group had better performance than companies that did not disclose green growth related information.

To provide more data for sufficient analysis of the capital market, CASVI has partnered with WIND to publish the 4 tier-three indicators data (June 2016, June 2017, June 2018 and December 2018) free of charge. Please contact us for more information at info@casvi.org .