What is ESG?
ESG stands for Environmental, Social and Governance. i.e. Environmental, Social and Corporate Governance. ESG can be understood as E+S+G, where E is Environmental, S is Social, and G is Governance. To understand simply, enterprise management needs to evaluate the sustainability of business operations and the impact on social values from three dimensions: environmental, social and corporate governance.
The development of ESG in China
In 2006, the Shenzhen Stock Exchange issued the Guidelines for the Social Responsibility of Listed Companies on the Shenzhen ** Stock Exchange, which began to mention the environmental protection and social responsibility of listed companies. In 2008, the Shanghai Stock Exchange issued the Notice on Strengthening the Social Responsibility of Listed Companies. In 2008, the first truly socially responsible public offering was issued in China. After 2010, the assets under management of related types of responsible investment** in the domestic financial market began to grow significantly. Since June 2018, A-shares have been officially included in the MSC Emerging Markets Index and MSC1 Global Index, and international capital has paid more attention to the ESG content disclosure of listed companies. On September 30, 2018, the CSRC revised the Code of Governance for Listed Companies to add environmental protection and social responsibility, clarifying the responsibilities of listed companies to stakeholders, employees, society and the environment, highlighting the guiding role of listed companies in environmental protection and social responsibility, and establishing a basic framework for ESG information disclosure. On November 10, 2018, the ** Industry Association officially released the "Research Report on the ESG Evaluation System of China's Listed Companies" and the "Green Investment Guidelines (Trial)", which put forward the core index system for measuring the ESG performance of listed companies, and is committed to cultivating long-term value-oriented investment industry norms, which further promotes the development of ESG in China. On March 18, 2019, the ** Industry Association further issued the Notice on Submitting Self-Assessment Reports as a specific implementation document for the Green Investor Guidelines (Trial). ESG has gradually become one of the practical principles that require relevant asset managers to effectively fulfill their relevant obligations. In May 2019, HKEX issued a consultation paper on the review of the Environmental, Social and Governance Reporting Guide and related Listing Rules, amending the original ESG Guide, which is the third revision of the ESG Guide since its introduction in 2012. On March 13, 2023, the Hong Kong Stock Exchange released the "2022 Listing Committee Reportopen in New Window", which pointed out that the follow-up ESG guidance "In terms of ESG, we will focus on adjusting our climate disclosure standards in 2023 to align with the recommendations of the Panel on Climate-related Financial Disclosures (TCFD) and the new standards of the International Sustainability Standards Board (ISSB)." We expect to publish a consultation paper on this issue in the first half of 2023." It is expected that the subsequent ESG guidance of the Hong Kong Stock Exchange will add TCFD content or correspond to it. A-share ESG disclosure is about to enter the era of compulsion!!
On February 8, 2024, under the unified deployment of the China Securities Regulatory Commission, the Shanghai and Shenzhen North Stock Exchanges issued the Guidelines for the Self-Regulatory Supervision of Listed Companies - Sustainability Report (Trial) (Consultation Paper) (hereinafter referred to as the "Consultation Paper"). The formulation of the "Consultation Draft" is an important institutional arrangement for the three major exchanges to thoroughly implement the overall requirements of the 20th National Congress of the Communist Party of China on promoting economic and social development and transformation, low-carbon strategic deployment and the first financial work conference on doing a good job in the five major articles including green finance, and it is also a specific work measure to implement the China Securities Regulatory Commission's "Three-year Action Plan for Promoting the Improvement of the Quality of Listed Companies (2022-2025)", aiming to better play the role of the capital market hub and strengthen the disclosure of sustainable development information. Promote the improvement of the quality, investment value and investor return level of listed companies, guide various elements to gather in the field of sustainable development, and promote the realization of the dual carbon goals and the sustainable development of economy, society and environment. The release of the Consultation Paper by the three major exchanges marks a new milestone for the disclosure of ESG (Environmental, Social and Governance) information in A-shares.
According to the disclosure entities stipulated in the Consultation Paper, the first batch of enterprises to be included are as follows:
The Consultation Paper proposes that the disclosing entity should publish the 2025 Sustainability Report at the same time as the annual report by April 30, 2026.
How can companies do ESG well?
To do a good job in ESG, companies need to start from the following aspects:
Develop and implement ESG strategies and plans to ensure that ESG becomes the core strategy of the company's long-term development. Establish ESG-related management systems and standards to ensure that various measures are implemented, supervised and evaluated. Strengthen the disclosure and dissemination of ESG information, carry out dialogue and communication with stakeholders, and improve corporate transparency and social responsibility. Cultivate and improve ESG awareness, encourage employees and stakeholders to actively participate in ESG practices, and form a good atmosphere for all employees to agree and participate. By practicing ESG, companies can make a positive contribution to society and the environment, improve their voice and competitiveness, and obtain long-term economic and social benefits. ESG Executive Management Training Course !!
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