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In order to create a national standard for corporate sustainability disclosures by 2030, China’s Ministry of Finance has started to request feedback on a draft guideline.
The action is being taken in response to the increasing emphasis on Environmental, Social, and Governance (ESG) concerns throughout the world, which has made improved corporate sustainability disclosures necessary.
The draft guideline had been made available on the ministry’s official website.
According to the government, Chinese enterprises’ disclosures are now mostly voluntary and devoid of set guidelines.
The “Corporate Sustainability Disclosure Standards — Basic Standards” draft guideline establishes broad guidelines for corporate sustainability information disclosures and is applicable to Chinese-established businesses that are mandated to provide such disclosures.
Considering the current state of development and the disclosure capacities of Chinese corporations, the required method to implementing the fundamental requirements will not be one-size-fits-all.
As an alternative, it seeks to progressively move disclosures from optional to required and from listed to non-listed businesses.
China plans to implement fundamental disclosure criteria for business sustainability and disclosure standards pertaining to climate change by 2027.
Due to the long development period of the standards system, relevant agencies have the authority to create guidelines and regulatory systems, with the intention of modifying and improving them over time, for certain sectors or fields.
ESG OUTLOOK
China has implemented a number of noteworthy policies in the environment, carbon peak and carbon neutrality, and ESG domains since April.
The standards for sustainable development reports by listed businesses have been formally announced by the stock exchanges in Shanghai, Shenzhen, and Beijing. This marks the first complete norm for corporate sustainability information disclosures in China.
Furthermore, a combined guidance that incorporates ESG into credit evaluations for the first time has been released by the central bank and seven other agencies.
In addition to having a negative influence on listed businesses’ operations, sustainable risks including environmental pollution, labor rights violations, and climate change also pose a threat to the attainment of sustainable goals for social and economic progress.
Concerns over whether listed businesses’ business activities follow sustainable development guidelines are growing among stakeholders and investors.
A research by China Galaxies Securities states that as of the end of April of this year, 1,938 A-share listed firms have released reports with an ESG theme.
The greatest disclosure rates for ESG reports are seen in the public utility, mining, steel, banking, and non-bank finance sectors. Centrally-administered state-owned firms with listed status had the highest corporate attribute disclosure rate, at 80 percent.