Financial Indicators of Value Dynamics of ESG-oriented Companies in China

Abstract

The priority of investing in sustainable development and ESG-oriented companies has become a global trend. Along with the developed markets of the USA and Europe, numerous ESG indices have been formed in countries of other continents. This segment of the stock market shows high growth rates in China. The purpose of the article is to identify the financial indicators that are most closely related to the value dynamics of ESG-oriented companies in China. The empirical base for the comparative analysis of companies adhering to ESG principles and not implementing them in practice was 48 companies included in the SSE 180 ESG Leaders Index of the Shanghai Stock Exchange, and 44 companies from the Shanghai Composite index that are not included in the ESG indices. The analysis of the value dynamics of the two groups of companies showed the higher resilience of ESG-oriented enterprises to the crisis phenomena in the economy. However, the comparative analysis of multipliers did not allow us to conclude that one of the groups of companies is more attractive for investment. Special attention was paid to the study of financial indicators of fundamental analysis. The main conclusion is important for investors: the growth in the value of ESG-neutral companies is not consistent with the positive dynamics of financial indicators, and such investments are riskier than investments in ESG-oriented companies. Further research on investment attractiveness of financial ESG-instruments and individual companies, adhering to the principles of sustainable development and represented in the stock market of China, will be associated with more detailed factor analysis, which is important for Russian investors to make informed decisions when developing a new capital market.

Keywords

• esg
• profitability
• capital structure
• company value
• sustainable development
• cash flow