He Ping: Promote the Index Definition, Evaluation and Pricing of ESG Evaluation System from Four Levels

Source: World Finance Forum (WFF)

Published: 2021-07-19

On 29 June 2021, a seminar on “Sustainable Development and Theoretical Standard System of ESG Against the Background of Double Carbon Goals”, jointly sponsored by the World Finance Forum and the Institute of Global Sustainable Development of Tsinghua University and co-organized by Zhongchengxin Green Finance Technology (Beijing) Co., Ltd., was held in Beijing. 

Prof. He Ping, Director of China Financial Research Center at Tsinghua University, attended the seminar and said that the implementation of ESG must involve three important aspects: information collection, evaluation and pricing. It is necessary to promote the index definition, evaluation and pricing of ESG evaluation system from four levels, so as to form a relatively complete ESG evaluation system and reduce the possible conflicts in the international community caused by ESG.

Prof. He indicated that ESG is an abbreviation of various external factors brought about by enterprises’ blind pursuit of profits in their production and service provision process. These factors undermine sustainable development, which may destroy the harmony with nature and society, intensify social contradictions, and may also affect the unity within the enterprises. In fact, ESG is advocated to solve these external problems by means of market initiatives. On the premise of minimizing government intervention, enterprises are encouraged to assume more social responsibilities to cope with the increasingly severe challenges such as climate change, environmental pollution and the gap between the rich and the poor, and reduce the potential safety hazards, ethical conflicts and social contradictions that may be brought about by rapid technology development.

He Ping stressed that the implementation of ESG must involve three important steps, and we need to carefully identify and solve their potential problems. The first step is information collection. On the one hand, information collection comes from external monitoring, on the other hand, it relies on enterprises’ self disclosure; The second one is evaluation. How can we  assess whether ESG information is good or bad for society, environment and the enterprise itself? ESG evaluation itself has many uncertainties, even contradictions; The third process is pricing. When we use ESG as a market-oriented means to solve the problem of sustainable development or achieve overall harmony, there must be a transition from evaluation to pricing.

Prof. He pointed out that the ESG evaluation system needs to be divided into different levels: The first level is for those indicators that can be monitored, priced and uncontroversial and they should be listed as core indicators; The second level is for those indicators that are uncontroversial, monitorable, but difficult to price; The third level is for those that are uncontroversial but difficult to monitor; The fourth one is for those controversial indicators. Through clear definition, evaluation and pricing of these four levels of indicators, a relatively complete ESG evaluation system will be established, which will reduce the possible conflicts in the international community caused by ESG.

Prof. He Ping concluded that the promotion of digital technology, especially the application of blockchain technology, will accelerate ESG data collection and make ESG data collection, definition and processing more efficient. We need to dynamically adjust the ESG evaluation system. In terms of international cooperation, we must seek common ground while reserving differences, get rid of ideologically conflicting indicators and work together globally to improve and enhance the ESG evaluation system.