China charts path to unified sustainability disclosure by 2030

• Thursday, June 6, 2024
• Source:ferro-alloys.com

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[Ferro-Alloys.com]

 

China's Ministry of Finance has begun soliciting opinions on a draft guideline aimed at unifying corporate sustainability disclosures, with a vision of establishing a nationwide standard by 2030.

 

Currently, disclosures by Chinese companies are largely voluntary and lack uniform standards, according to the ministry.

 

Unified rules will help companies better engage in global trade and investment activities, enhance their international competitiveness, and support China's institutional opening-up, the ministry said.

 

The draft guideline, named "Corporate Sustainability Disclosure Standards -- Basic Standards," sets general requirements for corporate sustainability information disclosures and applies to companies established in China that are required to disclose such information.

 

Taking into account the development stage and disclosure capabilities of Chinese companies, the implementation of the basic standards will not adopt a one-size-fits-all mandatory approach.

 

Instead, it aims to gradually extend from listed companies to non-listed companies and from voluntary to mandatory disclosures.

 

By 2027, China expects to have introduced basic corporate sustainability disclosure standards and climate-related disclosure standards.

 

Given the lengthy development timeframe for the standards system, relevant departments may formulate guidelines and regulatory systems for specific industries or fields as needed, with plans to adjust and improve them over time.

 

ROSY ESG OUTLOOK

 

Since April, China has rolled out a series of significant measures in the ESG, carbon peak and carbon neutrality, and ecological fields.

 

The Shanghai, Shenzhen, and Beijing stock exchanges have officially released guidelines for listed companies' sustainable development reports, marking the first comprehensive standard for corporate sustainability information disclosures in China.

 

Additionally, the central bank and seven other departments have jointly issued a guidance that for the first time explicitly includes ESG in credit assessments.

 

Sustainable risks such as climate change, environmental pollution, and damage to workers' rights can severely impact the operations of listed companies and are detrimental to the achievement of sustainable economic and social development goals.

 

Investors and other stakeholders are increasingly concerned about whether the business practices of listed companies align with sustainable development directions.

 

As of the end of April this year, 1,938 A-share listed companies have published ESG-themed reports, according to a report by China Galaxies Securities.

 

The banking, non-bank finance, steel, mining, and public utilities industries have the highest disclosure rates for ESG reports. In terms of corporate attributes, the disclosure rate of listed centrally-administered state-owned enterprises is the highest, reaching 80 percent.

 

This year marks the 20th anniversary of the ESG concept, and China's ESG investment is rapidly growing.

 

According to data from SynTao Green Finance, by the end of the third quarter of 2023, China's ESG investment scale reached 33.06 trillion yuan (about 4.56 trillion U.S. dollars), a record high, with a 34.4 percent increase from 2022.

 

As investment concepts are increasingly recognized and accepted, ESG-related financial products are becoming more diverse. According to Wind data, between 2019 to 2023, the number of pure ESG funds in China grew from 16 to 135, and ESG stock indices increased from 66 to 370.

 

The draft guideline consists of six chapters and 33 articles, covering general provisions, disclosure objectives and principles, information quality requirements, disclosure elements, other disclosure requirements, and supplementary provisions.

 

The deadline for soliciting opinions is set for June 24 of this year.

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• [Editor:kangmingfei]