Text: Reporter Guo Yan.
With the deepening of the concept of sustainable development, the concept of ESG (Environmental, Social, Governance) is being accepted by more and more Chinese enterprises. According to MioTech data, as of the end of July 2023, A-share companies that disclosed ESG information in 2022 covered about three-quarters of the total market value of A-shares. In 2023, about one-third of listed companies in the market will publish ESG reports, compared with only a quarter in 2022.
The ESG concept embodies environmental, social and governance aspects, and promotes enterprises to pursue sustainable development from the single pursuit of economic interests to the pursuit of the maximization of comprehensive economic, social and environmental values. At the China ESG Conference 2023 and the first China ESG Academic Symposium held recently, Shang Fulin, member of the Standing Committee of the 13th National Committee of the Chinese People's Political Consultative Conference and director of the Economic Committee, said.
China remains a sustainable investment market in the Asia-Pacific region that cannot be ignored.
Recently, J.P. Morgan Asset Management released a report entitled "China's Sustainable Investment Journey", pointing out that Europe may be a leader in sustainable investment, but except for Japan, China is still a sustainable investment market in the Asia-Pacific region that cannot be ignored. As of the end of the third quarter of 2023, China accounted for more than 67% of AUM in this sector.
The ESG field is currently in a stage of rapid development, and more and more institutional and individual investors are beginning to pay attention to the ESG performance of companies and incorporate it into their investment decisions. China** attaches great importance to sustainable development and ecological civilization construction, providing strong policy support for enterprises' ESG practices; At the same time, Chinese enterprises have also made significant progress in technological innovation and industrial upgrading, providing better basic conditions for ESG practice. Yuan Shuai, deputy secretary-general of the Zhongguancun Internet of Things Industry Alliance and executive director of the high-quality development promotion project of specialized and special new enterprises, pointed out in an interview with this magazine.
According to Morningstar's latest data report, "Global Sustainability** Review: Q3 2023", China was the country that issued the most green bonds in the world in 2022. From $26 billion at the end of 2020 to $42 billion in the second quarter of 2023, the inflow of funds into ESG products in the Chinese market is steadily increasing.
On June 26, 2023, the International Sustainability Standards Board (ISSB) released two official documents for the first time, IFRS S1 – General Requirements for Sustainability-related Financial Disclosures and IFRS S2 – Climate-related Disclosures, which opened a new era of sustainability-related disclosures in global capital markets. On the eve of the official release of the two standards, the IFRS Beijing office was inaugurated in Beijing, and the Ministry of Finance said at the unveiling ceremony that China will fully support the work of the first meeting and the development of international sustainability disclosure standards.
In 2023, the State-owned Assets Supervision and Administration Commission (SASAC), the State Administration of Financial Supervision (SAMR) and other regulatory authorities will issue relevant documents to strengthen ESG supervision through measures such as statistical monitoring, information disclosure, and assessment and evaluation. At the local level, many local departments participated in and organized high-level ESG forums and meetings, and ESG and high-quality development. On December 29, 2023, the newly revised Company Law was voted by the National People's Congress and will come into force on July 1, 2024. The new Company Law proposes that the state encourages companies to participate in social welfare activities and publish social responsibility reports.
In 2021, the PBOC formulated the Guidelines for Environmental Information Disclosure by Financial Institutions. In practice, some banks separate ESG reports and environmental disclosure reports (also known as green finance reports and TCFD reports) to form a pattern of "three regular reports" together with the banks' annual reports. 2023 is the first year that Shenzhen has implemented mandatory disclosure under the Green Finance Regulations. In Shenzhen, 161 financial institutions (including banks, insurance, trusts, securities firms, public offerings, and private placements) are required to disclose their reports, and the legislative drive has achieved remarkable results.
Chinese companies responded positively.
In 2023, Chinese companies have shown positive attitudes and actions in ESG practices. Many companies have actively participated in ESG practices, and have performed well in low-carbon development, energy transition, and ecological protection. For example, Sinopec, PetroChina, CNOOC, Alibaba, Tencent, Alibaba, Industrial and Commercial Bank of China and other enterprises have positive performance.
In an exclusive interview with this magazine, Pan Jun, director of commodity strategy consulting at a world-renowned consulting company, pointed out: "These companies actively respond to national policies, perform well in environmental protection, social responsibility and corporate governance, and actively promote ESG management within the enterprise. At present, the international ESG field is developing rapidly, and the Chinese market is gradually catching up. Compared with the international market, China's policy support for environmental protection and sustainable development is more obvious, and the technology application of enterprises in digitalization and intelligence is more mature. ”
Regarding the current investment and development of China's ESG field, Wu Qi, academic general counsel of the Hebei Carbon Peak and Carbon Neutrality Research Association, told this reporter: "There are three main aspects of domestic ESG investment: first, from the perspective of different industries, the pharmaceutical industry, the power industry, and the basic chemical industry are the industries with the largest number of ESG reports; Second, focusing on the dual carbon goals, green finance represented by green bonds has been highly valued and developed rapidly, and new energy and energy storage have become ESG-themed investment directions. The third is to accelerate the integration with international standards and actively participate in international initiatives and standard-setting, such as the issuance of the G20 Sustainable Finance Roadmap led by the People's Bank of China. ”
In recent years, state-owned enterprises have paid more and more attention to ESG, surpassing private enterprises in terms of quantity and quality. On May 4, 2023, the CSI Chengtong Central Enterprises ESG Index and the CSI Central Enterprises ESG 50 Index were officially released; On May 8 of the same year, the CSI Guoxin Central Enterprises ESG Growth 100 Index was officially released. With the release of the ESG index of central enterprises and more and more companies have begun to pay attention to ESG development, ESG investment targets are expected to further expand in the future.
Driven by the national strategy of the 'dual carbon' goal, state-owned enterprises, especially high-energy-consuming industries such as petrochemicals, electric power, chemicals, and transportation, are the main force in carbon reduction, and ESG will become the only way for state-owned enterprises and central enterprises to achieve green transformation and long-term sustainable development. The second is the inevitable requirement of the valuation system with Chinese characteristics, which takes into account both efficiency and fairness, which coincides with ESG, and in a sense, ESG is an important part of the special valuation. China's development stage and the mission and responsibility of state-owned enterprises urgently require the construction of an ESG evaluation system with Chinese characteristics. Wu Qi pointed out.
However, there are certain challenges in terms of the level of ESG information disclosure, corporate governance structure, and the enforcement of environmental protection regulations. Bai Wenxi, chairman of the China Enterprise Capital Alliance, believes that in the process of practice, enterprises should pay attention to following national policies and regulatory requirements to ensure the compliance of ESG practices. Focus on the substance of ESG practices, not just the surface. According to the characteristics of the enterprise itself and the characteristics of the industry, formulate a targeted ESG development strategy. Strengthen communication and cooperation with investors, ** departments, social organizations and other stakeholders to jointly promote ESG development.
More progress is expected in the legalization and digitization of ESG.
According to the China SIF Annual Report 2023, there are three policy trends worth paying attention to in 2024: first, the progress of information disclosure is worth looking forward to, and it is expected that the attitude of various ministries and commissions towards the ISSB standards will gradually become clearer, and the prior practice of market participants will also provide more information for decision-making; Second, as more ministries and commissions become involved in the ESG field, the urgency of the cross-ministerial coordination mechanism is becoming increasingly prominent. Third, the progress of the green finance reform pilot zone and the climate investment and financing pilot is worth paying attention to.
In Wu Qi's view, there are four main trends in the development of ESG investment in China, namely rule of law, marketization, internationalization, and digitalization. In particular, more progress is expected in the rule of law and digitalization.
China will accelerate the improvement of ESG-related standards, rules and policy systems, especially ESG information disclosure and evaluation standards. Marketization is the direction, so that enterprises can truly realize the value of ESG, and become a spontaneous behavior of the market rather than a policy compulsion. ESG has become the standard for listed companies and even all enterprises. Internationalization is the standard, strengthen international exchanges and cooperation while seeking common ground while reserving differences, build an ESG evaluation system with Chinese characteristics, and promote the unification of domestic and foreign standards. Digital technologies such as AI and big data are more widely used in ESG work, and more innovative solutions based on digital technology are proposed to improve ESG information disclosure and data management capabilities. Wu Qi pointed out. At the same time, he emphasized that ESG should not be simplified to E, but should be promoted to go hand in hand. The second is to avoid ESG becoming a bubble of capital speculation, and crack down on false propaganda, capital arbitrage and other chaos.
The report of Guolian** pointed out that for domestic asset management institutions, they can customize ESG integration strategies for different asset types and markets, launch diversified products, and provide investors with more choices; Make full use of shareholder rights, play a substantive role in corporate governance, and urge enterprises to improve ESG efficiency; Increase the disclosure of investment information such as ESG investment process, strategy implementation, risk control, etc., enrich the channels and forms of disclosure, and improve the quality of ESG investment.
With the deepening of the "dual carbon" practice, more and more enterprises will pay more attention to sustainable development. Pan Jun said that in 2024, Chinese enterprises can further strengthen the popularization and training of ESG concepts in terms of ESG implementation, so that more employees can participate in ESG practice. Actively promote the application of digital and intelligent technologies in ESG practice to improve management efficiency; Strengthen cooperation with international organizations and learn from international advanced experience; Improve the transparency of information disclosure and give investors and the public a better understanding of the company's ESG performance.
Enterprises need to further strengthen the formulation and implementation of ESG strategies and integrate ESG into their long-term development plans. Strengthen ESG information disclosure and transparency, and better communicate and exchange with investors and the public. Pay attention to talent training and team building, and strengthen the cultivation and introduction of ESG professionals. Yuan Shuai pointed out.