Air Pollution in China:
A Hazy Future?

Executive Summary

- Air pollution has become one of the most pressing challenges in China. The Chinese central government has vowed to “declare war on air pollution” with targets set at industry and national levels.

- The main sources of air pollution in China are industrial and household coal; emissions from heavy industries such as steel; auto emissions; and dust from construction sites and land transportation.

- The Beijing-Tianjin-Hebei (Jingjinji) Area, the Yangtze River Delta and the Pearl River Delta are the three most polluted regions in China. The cities and provinces within these regions have tightened regulations and set ambitious air quality improvement targets to tackle air pollution.

- To assess company’s investment risk with regard to air pollution, we have developed a research framework which consists of a regulatory exposure component and a management preparedness component. We jointly assess these two components to evaluate the company’s overall investment risk level.

- Based on our Exposure/Preparedness framework, among the 52 Chinese companies assessed in this report, 16 have been identified as high risk, 22 as medium risk, and 14 as low risk.

- Power producers, cement and petrochemical manufacturers, as well as coal producers face relatively higher risks, while transportation and real estate companies face more limited risks.

- Companies we deem most at risk are:

  • China Shenhua Energy Co. Ltd. (SEHK: 1088)
  • China Petroleum & Chemical Corp. (Sinopec) (SEHK: 386)
  • China Resources Power Holdings Co. Ltd. (SEHK: 836)
  • Huadian Energy Company Limited (SHSE: 900937)
  • Anhui Conch Cement Co. Ltd. (SEHK: 914)
  • China National Building Material Company Limited (CNBM) (SEHK: 3323)
  • Sinopec Yizheng Chemical Fibre Co. Ltd. (SEHK: 1033)
  • Metallurgical Corporation of China Ltd. (SEHK: 1618)

- Solution providers from sectors such as environmental protection (air pollution control and air pollution abatement), natural gas, nuclear and renewable energy (hydropower, wind and solar power), and new energy vehicles will likely benefit from China’s tightened air pollution regulations.

- Solution providers likely to benefit include:

  • Create Technology & Science Co., Ltd. (SZSE: 000551)
  • Kelin Environmental Protection Equipment, Inc. (SZSE: 002499)
  • Beijing SDL Technology Co., Ltd. (SZSE: 002658)
  • Kunlun Energy Company Limited (SEHK: 135)
  • SINOHYDRO Group Ltd (SHSE: 601669)
  • Xinjiang Goldwind Science & Tech Co Ltd (SZSE: 002202)
  • China National Nuclear Power Co.
  • Yingli Green Energy Holding Co Ltd (NYSE: YGE)
  • BYD Co Ltd (SEHK: 1211, SZSE: 002594)
  • VolkswagenAG (ETR:VOW) 

To download the full report, go to Sustainalytics.

[Source: Sustainalytics]