HONG KONG --- ESG refers to the performance of an enterprise in terms of Environment, Social and Governance. It is an investment philosophy that focuses on the environmental, social and governance performance of an enterprise and a non-financial measure or standard for measuring the performance of an enterprise. With the continuous advancement of the global carbon neutrality process and China's transition to a high-quality and sustainable economic development model, ESG has become an important factor in corporate value judgment and development planning. Recently, a domestic power battery company obtained upgraded ESG ratings from a number of domestic and foreign rating agencies, and the ESG ratings from Refinitiv and Sino-Securities on this company are higher than most of its peers. So how important is ESG? And what is the underlying logic of the ESG efforts of this company?
Gotion High-tech ESG Rating Upgraded by Several Agencies
In June 2023, CCTV released its first achievement report, the Annual ESG Action Report, together with several ministries, commissions and organizations. The Report stated that under the leadership of national strategies, Chinese companies have begun a new phase of actively responding to ESG concepts and comprehensively improving their ESG performance. The overall performance of large Chinese companies in terms of ESG development and the percentage of outstanding companies is already comparable to that of large global companies, with leading companies in various industries spearheading sustainable development.
As the new energy industry is an important part of "carbon neutrality", companies in such industry pay special attention to ESG performance and take active measures in this regard. Take Gotion High-tech, a power battery company in China, for example, the Company has achieved remarkable results in recent years with continuous improvement and advancement in ESG. According to statistics, the Company's 2022 annual ESG report was highly recognized by domestic and overseas rating agencies, including FTSE Russell, Morningstar, Refinitiv and Wind. For international ESG ratings, Gotion High-tech's ratings in FTSE Russell, Morningstar, and Refinitiv are in an industry leading position, and with the rating of 71.0 (B+) by Refinitiv, Gotion High-tech ranked first among its peers in China. For domestic ESG ratings, Gotion High-tech got Grade A rating from Wind and China Chengxin and Grade BBB rating from Sino-Securities, also ranked among the top players in China.
Why ESG is Gotion High-tech's competitiveness?
Since the United Nations Principles for Responsible Investment (UNPRI) proposed ESG in 2004, green development has gradually become a worldwide consensus and unanimous action. The ESG system indicates that enterprises not only create profits for shareholders, but also create value for society. Therefore, in the short term, enterprises will incur a certain cost to invest in ESG. However, in the long run, the reputation that ESG brings to a company can help it gain a greater competitive advantage in the market.
In recent years, with the introduction of the goal of "carbon neutrality", major countries around the world have adopted various measures to reduce carbon emissions and strive to achieve net-zero carbon emissions, so as to actively respond to the challenge of global climate change. As a result, major countries around the world are actively seeking transition to a clean, low-carbon and highly efficient energy system by stepping up their efforts in the development of renewable energy.
Particularly for companies with global operations, there will be significant opportunities for incremental global markets centered on key ESG issues such as carbon neutrality.
In particular, the European Union was the first to set long-term emission reduction targets, and 11 member states have proposed carbon neutrality target years. A number of member countries, including Germany, France and Sweden, have specified the political goal of achieving carbon neutrality in the form of legislation and proposed feasible ways to achieve carbon neutrality. The EU has introduced the European Green Deal in 2019, the Green Bond Revolution in 2020 and new clean energy proposals in 2023. At the end of April, the EU CBAM (Carbon Border Adjustment Mechanism), known as the EU's "carbon tariff", was voted on by the EU Council. Only companies that truly practice green and low-carbon development models and can effectively balance operating profits and ESG expenditures are eligible to enter the European market. This also means that only companies that have localized their business in Europe at an early stage will be in a better position to adapt to the relevant EU policies and take this opportunity to gain more share in the EU domestic market.
Take Gotion High-tech as an example, in the Company's global manufacturing layout, in addition to Southeast Asia, South Asia, and the Americas, it has also directly established production bases in Europe. In July 2021, Gotion High-tech established its first new energy production and operation base in Europe in Gottingen, Germany, to carry out localized production in Europe. In July 2021, Gotion High-tech established its first new energy production and operation base in Europe in Gottingen, Germany, to carry out localized production in Europe. It is reported that the Gottingen base covers an area of approximately 174,000 square meters and develops new energy battery products in line with the development of the European new energy market and technology guidelines. The plant will reach full capacity in 2025, and is expected to achieve the production capacity target of 20GWh per year. As Gotion High-tech gradually establishes a firm foothold in Europe, it is foreseeable that the company's influence and brand awareness in the global market will also grow in the future.
In addition, Gotion High-tech has established a joint venture with NUOVO PLUS, a subsidiary of Thailand's PTT Group, reached a supply agreement with Borrego, a US energy storage company, and started the first phase of a 5GWh battery plant in Ha Tinh, Vietnam, with a plan to reach a production capacity of 300GWh in 2025. At a time when countries around the world are placing increasing emphasis on green industries, Gotion High-tech continues to grow its global influence with its excellent ESG governance.
For ESG disclosure, in October 2022, the European Securities and Markets Authority (ESMA), the EU's market regulator, added ESG disclosure to its key priorities, indicating that the EU regulator pays more attention to the standardization and necessity of corporate ESG disclosure. In November 2022, the Corporate Sustainability Reporting Directive was adopted by the Council of the European Union, establishing more mandatory and stringent requirements on corporate ESG disclosure.
This means that international mainstream automakers will inevitably respond to ESG management requirements and propose higher standards to the upstream of the industry chain. It also means that under the requirement of enhancing corporate transparency, companies are bound to improve their governance capacity in a comprehensive manner under the supervision of investors, the public and the government.
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GOTION HIGH-TECH CO.,LTD. 
