Tourism Industry Reshaped by ESG Ratings: Songcheng Performance's Leap to Grade B

The evaluation criteria for the cultural tourism industry are undergoing a transformation. Traditionally, visitor numbers, average customer spending, and net profit were the cornerstone metrics for assessing companies. However, the emergence of ESG (Environmental, Social, and Governance) ratings is beginning to reshape the hierarchy within capital markets.

China’s cultural tourism giant, Songcheng Performance (300144.SZ), recently achieved an upgrade in the global ESG ratings of the London Stock Exchange, moving from a C- to a B grade. While this may appear to be a minor shift, it is significant given the company’s years of stagnation in the C-grade category. After maintaining a rating trajectory of C- in 2023, C in 2024, and C- again in 2025, the leap to B in early 2026 marks a notable breakthrough. According to the London Stock Exchange criteria, a B grade signifies that the company’s transparency in ESG data disclosure surpasses the market average.

Industry Leader in Governance

An analysis of Songcheng Performance’s ESG score reveals some noteworthy characteristics. In a comparative study of five peer companies, Songcheng ranks fourth overall. It scores 43.70 points for its Environmental (E) metrics and 55.60 for its Social Responsibility (S) metrics, placing it second-to-last in both areas.

For asset-heavy cultural tourism companies, achieving high scores in Environmental and Social categories is inherently challenging. Energy consumption for stage lighting, carbon emissions in scenic areas, and the impact of high-density visitors on surrounding environments are structural obstacles. Large-scale live performances, scenic area management, theater lighting, visitor flow management, transportation, food and beverage facilities, and facility maintenance all contribute to constant pressure around energy use, carbon emissions, waste management, and operational safety.

However, Songcheng stands out in the Governance (G) category, scoring an impressive 77.00 points, the highest in the industry. It significantly outpaces BTG Homeinns Hotels, which scored 68.50, and China Duty Free Group, which lags behind with only 45.80 points, despite having a market capitalization exceeding RMB 100 billion. This means that while Songcheng ranks fourth in Environmental and Social responsibility, its governance excellence allows it to outperform even the largest players in the industry.

The Factors Behind the High Governance Score

The London Stock Exchange’s governance evaluations emphasize the independence and transparency of the board of directors, the quality of information disclosure, anti-corruption compliance systems, fairness in related transactions, and mechanisms to protect minority shareholders’ interests. A high Governance score indicates that a company’s governance structure can withstand scrutiny by international auditing bodies.

For a company like Songcheng Performance, whose core business involves replicating and operating its “Eternal Love” theatrical projects across different regions, robust governance is particularly critical. According to its 2025 annual report, the Hangzhou Songcheng Tourism District accounts for 26.19% of its revenue, while the remainder comes from multiple locations nationwide, including Lijiang Eternal Love (10.71%), Guilin Eternal Love (9.27%), Guangdong Eternal Love (7.94%), Xi’an Eternal Love (7.03%), and Shanghai Eternal Love (7.02%).

The advantage of this model lies in its ability to replicate well-established IP and operational systems in different cities, maximizing brand efficiency and project scalability. However, as the number of remote projects grows, the complexity of management chains increases. Local partners, project companies, scenic resources, land and real estate, ticketing systems, supplier networks, performer management, visitor safety, and financial accounting—all these factors amplify governance challenges.

The London Stock Exchange’s high score of 77.00 for governance underscores that Songcheng has built a standardized and highly transparent governance system capable of passing international audits.

A more direct indicator of governance quality is the company’s dividend policy. Since its listing on the A-share market, Songcheng has paid a cumulative dividend of RMB 3.064 billion, including RMB 1.441 billion over the past three years alone. Even as its parent company’s net profit fell by 22.03% year-on-year in 2025 and 15.06% year-on-year in the first quarter of 2026, the dividend schedule remained unaffected. The 2025 annual report announced a planned dividend of RMB 2.5 per 10 shares. In the A-share cultural leisure sector, maintaining stable dividends despite performance pressures is extremely rare. This practical demonstration of protecting minority shareholders’ interests through financial distribution has been a key factor in earning the trust of international investors.

The Growing Polarization in the Industry

Songcheng Performance’s success is not an isolated case but rather a reflection of a broader polarization in ESG ratings across the industry. Jinjiang Hotels and BTG Homeinns Hotels both achieved B+ ratings in the latest evaluations, forming the top tier of the industry alongside China Duty Free Group. These companies share common traits: mature systems, relatively complete information disclosure, large-scale operations, and balanced performance in green operations, social responsibility, and governance structures.

In particular, hotel groups have made significant strides in recent years in areas like energy conservation, emission reduction, green supply chains, disposable product management, employee rights protection, customer safety, and franchise management. These efforts have laid a strong foundation for ESG disclosure. ESG has already become a hard asset for attracting international investment and entering overseas markets.

On the other hand, China Sports Industry Group received the lowest rating of D-, with an Environmental score of zero—a score that indicates not just poor performance but a complete lack of disclosure. In the future capital market landscape, there will be no middle ground. Companies must either actively adopt international standards or risk becoming irrelevant in the market.

Indeed, dividend-focused funds such as “China-Europe Dividend Advantage Flexible Allocation A” have recently taken an interest in Songcheng Performance. Their attention is drawn to “certainty assets” characterized by governance compliance, stable dividends, and high transparency during periods of uncertainty.

Editorial Opinion

In the short term, cultural tourism companies are likely to accelerate their efforts to enhance ESG disclosure, with a particular focus on governance improvements. For companies aiming to raise funds in international capital markets or pursue overseas listings, ESG ratings are rapidly becoming a mandatory requirement. Establishing robust disclosure systems is emerging as a key source of competitiveness. As Songcheng Performance’s case demonstrates, even companies with weaknesses in Environmental and Social metrics can adopt a governance-focused strategy to succeed.

From a long-term perspective, the quality of ESG disclosure is poised to become a critical factor in corporate valuation, driving demand for information disclosure platforms and ESG data analytics services. If standardization of industry-specific evaluation frameworks advances, it could accelerate the restructuring of the tourism sector.

For Japanese companies, the ability to adapt to ESG requirements is becoming an increasingly crucial differentiator in competing within the Chinese market and international capital markets. Editorially, we wish to pose the fundamental question of whether ESG ratings truly reflect a company’s intrinsic value. How should companies with high Governance scores but extremely low Environmental scores be evaluated?

References

• “30亿元分红、治理分第一，做文旅投资的人，现在都在盯这张新牌”, by 迈点 — 钛媒体, 2026-07-17T10:11:06.000Z (ARR)
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