核心观点：

• 2021年第2季度A股建筑材料行业公司的ESG评级表现弱于A股市场整体表现，尤其是ESG表现突出的公司较少。
• 整体而言，建材行业的环境表现有待提升，环境表现的不足对于建材行业整体表现已经产生较大负面影响。建筑材料行业公司可以采取更加积极的环保措施，投资节能减排技术和在可持续发展报告中增加叙述性披露，阐述公司为促进环境保护做出的努力，增进投资人和公众对公司的信任。
• 不同于环境表现，建材行业在社会绩效表现披露中，包含较多政策、措施等叙述性披露，但却未能完整披露关键绩效点的数值，不利于利益相关方了解公司的劳工管理和职工职业健康与安全情况。

ESG表现总览

截至2021年第二季度，共有73家建筑材料行业的公司在A股上市，它们主要从事水泥、玻璃制造，和管材、耐火材料制造。

2021年第二季度，我们一共对其中71家上市公司进行ESG表现评级，其中有31家公司获得了C评级，23家公司获得DDD评级，成为本季度建筑材料公司最普遍的两种评级。

建筑材料行业本季度ESG评级结果相对集中，缺乏表现突出的企业。但是，这也反映当前建筑材料行业面临着一些共同的ESG管理问题。

图 1 2021年第2季度建材行业A股上市公司ESG评级分布

Source: MioTech

During the second quarter of this year, the environmental pillar saw a major setback, with an average environmental score of 18.08 (out of 100) among all the rated companies; This is mainly due to lack of disclosure involving environmental initiatives and failure to comply with environmental regulations. Companies are considered to have paid greater attention to the social pillar, implied by an average social score of 42.93. The construction materials companies listed on A-shares have an average governance score of 37.37. Two best performers, with a BB rating, are Flat Glass Group Co. Ltd. and Anhui Conch Cement Company Limited.

The majority of the rated companies’ environmental scores fell between 10 and 15 marks. Social and governance scores are more spread out, but companies with social or governance scores in 30 to 40 made up the largest group.

Figure 2 Score Distribution of A-shares Construction Materials Companies as in 2Q21 by ESG Pillar

Source: MioTech

Risk Factors and Materiality

There is a universe of ESG topics, but they do not mean the same to companies from different industries or with different business mixes. We usually refer to the comparative importance of ESG topics to a company as materiality. MioTech determines the materiality of each ESG topic on an individual company basis, where the factors considered can include a company’s business mix, the market(s) which the company is listed under, and applicability of regulations on the company. An overview of the average materiality scoring results of the ESG topics for the 71 construction materials companies we rated can be seen in Figure 3.

The construction materials industry is subject to a high level of environmental risk, due to the massive emissions and waste it generates during its production[1]. It is also exposed to a high degree of social risk, with the most predominant being occupational health & safety and labor management.

Figure 3 Materiality Rank of ESG Topics Across the Construction Materials Industry

Source: MioTech

Environmental

In China, the sub-national environmental regulatory authorities examine the entities in each’s company's jurisdiction; they then label companies with excessive pollution caused as key pollutants discharge units. Companies under this classification are subject to extra measures of surveillance, which include limiting volume of pollutants discharging and fines will apply if companies fail to contain their pollutants within the limits.

Cement manufacturers combust fuels to turn limestone and clay into cement, a core construction material, which continue to be a considerable source of greenhouse gas emissions. According to the China Association of Building Energy Efficiency (CABEE)[2], in 2018 emissions arising from the production of construction materials reached 2.72 billion tonnes of tCO2, or 28.3% of China’s total emission in that year. In 2020, 47 listed construction materials companies were defined as key pollutants discharge units. In 2020, 7 companies were added to the list while another 3 were removed from this classification, compared to the 2019 version. In the second quarter, MioTech issued 9 “environmental non-compliance” and 2 “non-compliance with emission limits” news risk alerts that involve 8 A-shares construction materials companies in total. Fines range from RMB 10,000 to over RMB 50 million.

According to MioTech’s evaluation, environmental penalties issued by regulators will cause considerable financial losses if construction materials companies do not exercise due vigilance in their environmental management. Environmental topics make up 7 of the 10 most material topics for construction material companies, which include waste, climate change, GHG emissions, energy consumption, pollutants, water resources, and environmental management.

Social

Workforce wellbeing counts among any firm manager’s top areas of concern, and this is especially true for a labor-intensive industry like construction materials. A dedicated, vibrant group of workers can contribute to operational efficiency and customer satisfaction. That is why employers’ social responsibility for their workers, particularly health and safety-wise, is the most central social topic and the second-most valued among all ESG topics, followed by labor management at the third place.

There were no distinct cases in the second quarter where occupational health & safety and labor management posed a threat to construction materials companies. In the second quarter, MioTech issued 7 news risk alerts regarding construction materials companies’ social performance, 6 of complaints and litigations, and 1 of product safety and quality issues, concerning 3 companies in total.

Governance

The highest-ranked governance topic, business ethics, is in 10th place overall. Given that the main construction material products like cement and glass do not vary greatly in physical characteristics, the homogeneity of products provided by different manufacturers may give rise to anti-competitive behaviours if they are less likely to attain a larger market share with unique products. In a recent update of its ESG strategy, Germany construction materials behemoth Xella Group has reiterated its zero-tolerance policy towards fraud, bribery and anti-competitive behaviours[3].

Construction materials companies have shared governance risks with other industries. In the second quarter, MioTech issued 213 governance news risk alerts concerning 6 A-shares companies in the construction materials industry. Negative events of executives made up 136 of them, while other risk types include disclosure violation, financial fraud, insider trading and actual controller change.

ESG Performance

More companies lag in environmental performance (represented by companies landing in the left half of Figure 4) than in social performance (lower half of Figure 4). In general, environmental outperformers are not likely to fall below the benchmark in social factors. In the second quarter, two BB-rated ESG leaders in the industry, Flat Glass Group Co. Ltd. and Anhui Conch Cement Company Limited have achieved favourable scores for both their environmental and social performance.

Figure 4 Environmental and Social Scores of A-shares Construction Materials Companies

Source: MioTech

Environmental

The highly-anticipated China national carbon market finally launched in July 2021 and involves the electricity generation industry. It is anticipated that more carbon-intensive industries will be covered by the carbon market during the 14th FYP period [4], which include construction materials. In July, the Ministry of Ecology and Environment also announced that carbon emissions from the construction materials industry would be carried out in Zhejiang Province and Chongqing City to identify the volume of emissions and explore alternatives to decarbonize for the industry[5].

Analyses published by McKinsey & Company show that the cement industry can potentially reduce its total CO2 emissions by 75% by 2050; 55% of it will be realized upon technological innovations being achieved[6], pressing the importance of the industry’s own technological development to decarbonize. Of the 18 A-share-listed cement manufacturers, 2 have disclosed their technological innovation for environmental protection for 2020, BBMG Corporation and Anhui Conch Cement Company Limited. BBMG Corporation researched means of waste disposal, after which the wastes can be used as fuel alternatives to reduce emissions, while Anhui Conch Cement Company Limited. invested in carbon capture and storage (CCUS) projects.

Five out of 73 A-shares construction materials companies indicated in their 2020 disclosures that environmental committees or working groups had been established to oversee the company’s environmental impacts and environment protection initiatives. Of them, Flat Glass Group CO. LTD. has committed to proceeding environmental risk assessment before opening every new product line.

With regards to numeric disclosures, 3 companies provided the volumes of scope 1 and scope 2 greenhouse gas (GHG) they emitted in 2020, Flat Glass Group Co. Ltd., BBMG Corporation, and Anhui Conch Cement Company Limited. Flat Glass Group Co, Ltd. and BBMG Corporation saw a decline in scope 1 and scope 2 emissions in 2020, while Anhui Conch Cement Company Limited saw a rise. Notably, measures including the use of alternative fuels helped BBMG Corporation reduce its total emissions by 56.08% from 67.68 million tonnes to 29.68 million tonnes, and GHG emissions intensity from 736 to 275 tonnes of CO2 equivalents per million revenue Yuan.

Social

In 2020, only 2 A-shares construction materials companies disclosed data related to work-related injuries and fatalities, Flat Glass Group and BBMG Corporation, and only Huaxin Cement Co. disclosed lost-time injury frequency data. As occupational health & safety is among the top 3 material ESG topics key stakeholders of construction materials companies are concerned about, lack of numeric disclosure has become a major barrier to overcome for companies attempting to improve their ESG performance. However, with narrative disclosures, up to 18 companies committed to health & safety management at their best efforts in their disclosures, and 9 revealed in disclosures that they had obtained well-recognized certification for their health & safety management system, including OHSAS 18001 and ISO 45001.

In 2020, 2 companies assured their stakeholders that they would adhere to minimum wage regulation, Yonggao Co. and Ningxia Building Materials Group, and three promised to deliver proper work hours management, Flat Glass Group, Guangdong Dongpeng Holdings Co. and Anhui Conch Cement Company. It is worth-noting that even though minimum wage and working hours management are fundamental for companies and we can be confident that companies have done more in actuality than as reported in their sustainability disclosures, investor trust and public reputation is still enhanced by making this information public.

A sum of 5 companies disclosed their gender structure of workforce in 2020, in which the average ratio of female workers to total workers ranged from 18.62% to 25.20% with an average of 22.38%.

In the construction materials industry companies paid more attention to employees’ professional development, with 70 out of 73 companies stated their employee training programs in 2020. Notably, employees of Anhui Conch Cement Company received 100 hours of training on average in 2020.

Governance

Fewer industry-specific characteristics apply to governance issues of construction materials companies than environmental and social topics.

In 2020, the industry had an average ratio of female directors on board of 15.63%, and an average ratio of independent directors on board of 36.59%. The best performers on both indicators are China Railway Prefabricated Construction Co. and Zhejiang Huada New Materials Co.

Table 1 Top Performers on the Ratios of Female Directors and Independent Directors

Source: MioTech

Regarding business ethics, 10 and 6 A-shares construction materials companies respectively stated their anti-corruption and anti-bribery policies in sustainability disclosures, of which 4 disclosed both.

References

[1] S&P GLOBAL. ESG Industry Report Card: Building Materials and Engineering and Construction [R]: S&P GLOBAL, 2019.

[2] 中国建筑节能协会. 中国建筑能耗研究报告（2020） [R]. Xiamen: China Association of Building Energy Efficiency, 2020.

[3] LEICHT M, BRUNST A, KELLERT C, et al. Crafting Xella Group’s ESG Strategy for the 2020s [R]. Munich: Boston Consulting Group, 2021.

[4] 吴晓波. 全国碳市场空间将破万亿，普通人也能做“卖碳翁”吗？ [J/OL] 2021, https://wuxiaobo.blog.caixin.com/archives/248403.

[5] 生态环境部办公厅. 关于开展重点行业建设项目碳排放环境影响评价试点的通知 [Z]//生态环境部办公厅. 北京; 生态环境部办公厅. 2021

[6] CZIGLER T, REITER S, SCHULZE P, et al. Laying the foundation for zero-carbon cement [J/OL] 2020, https://www.mckinsey.com/industries/chemicals/our-insights/laying-the-foundation-for-zero-carbon-cement.