A special agency focussed on ESG (environmental, social and governance) reporting will help reform China’s environmental disclosure system.
In terms of climate emissions, China’s disclosure system is still nascent. According to a joint report by US-based nonprofit the Environmental Defense Fund and the Shanghai Environment and Energy Exchange, the main problems with climate disclosures include non-uniform standards and platforms, lack of clarity on the level of businesses and their subsidiaries, and low enthusiasm for participation.
These problems lead to lack of consistency and continuity in the data, making horizontal and vertical comparisons difficult. This is not helpful for regulators, investors and other stakeholders seeking to understand the actual climate risks and opportunities of a business.
New rules on businesses’ environmental disclosures came into effect in February 2022. For the first time, carbon emissions were included, with heavily polluting companies required to disclose data on them.
The new rules also require these companies to disclose environmental information via dedicated platforms set up by local environmental authorities, which the public can view free of charge. The system will be linked up with a national database containing information on companies including their creditworthiness.
Zhang believes that this will incentivise enterprises to disclose environmental information. The special ESG agency will assist energy- and automobile-related companies, as well as central state-owned enterprises, to carry out pilot demonstrations on ESG reporting.
In the future, Zhang said, the Foreign Environmental Cooperation Centre will also develop and improve various standards in the fields of ESG and green finance, and cooperate with banks and securities companies to promote funds that focus on biodiversity and ESG actions.
Read China Dialogue’s recent article on China’s environmental disclosure requirements.