Political importance
China has made significant strides in promoting ESG practices and integrating sustainability into its economic growth ambitions while actively combating greenwashing. China’s ESG journey can be seen in three phases. The first phase began in 2001, following China’s entry into the WTO, which introduced social responsibility concepts to Chinese companies. The second phase commenced in 2008 when the government mandated social responsibility reporting for specific companies, significantly boosting transparency. The third phase saw the introduction of formal ESG reporting requirements, including the China Securities Regulatory Commission’s (CSRC) 2021 mandate for ESG disclosures in company reports and the ‘Plan for the Reform of Legal Disclosure System of Enterprise Environmental Information’, aiming to establish a mandatory environmental disclosure system by 2025 for certain enterprises. To further encourage sustainable practices, the government has provided policy incentives, such as tax breaks, green technology subsidies, and green bonds, aligned with China’s carbon reduction goals.
To address greenwashing, China’s central government embedded sustainable development policies in its ’14th Five-Year Plan’, focusing on eco-friendly lifestyles, green growth, and biodiversity protection. In May 2023, the Ministry of Finance introduced a draft Corporate Sustainability Disclosure Standards, requiring both large and small-to-medium enterprises to ensure reliability, comparability, and timeliness in ESG disclosures. Additionally, public awareness and monitoring have become essential tools in China’s efforts against greenwashing.
Corporate attention
Corporate awareness and engagement in ESG practices have grown significantly in China. The number of companies issuing ESG-related reports has steadily increased, with state-owned enterprises (SOEs) and large energy-intensive industries leading the way in publishing detailed ESG, corporate social responsibility, or sustainability reports. As of April 2023, 70.4% of SOEs had released independent ESG reports. However, smaller companies often struggle with the quality of their reports due to costs.
Chinese companies increasingly adopt formal ESG strategies, frequently using materiality assessments and consulting with stakeholders to align ESG objectives with broader business goals. A 2023 survey by Fidelity revealed that over half of Chinese-listed companies have publicly committed to ESG or sustainability strategies, and about 30% are addressing these issues internally. For companies expanding internationally, alignment with global ESG standards has become a competitive advantage, helping them meet host countries’ employment, procurement, and environmental expectations.
Trends
Several emerging ESG trends are shaping the Chinese market in 2024, driven by government initiatives and market innovations. Regulators are prioritizing green and inclusive finance, with a focus on areas such as fintech, pension finance, and digital finance. Another focus is on green credit, a major ESG asset class, that continues to grow at an impressive rate of over 30% annually, and integration with inclusive finance is creating innovative opportunities for small enterprises and individual consumers. Local green finance policies are proliferating, with pilot zones achieving significant advancements in supporting carbon reduction and sustainability goals. Stronger ESG regulations are also taking center stage. Enhanced guidelines for green bonds and climate-aligned policies are being rolled out, ensuring improved monitoring and reducing greenwashing risks. Lastly, generative AI is sparking discussions around its dual-edged role in ESG. While it offers opportunities for improving ESG data analysis and reporting, concerns around energy consumption, carbon emissions, and societal impacts underline the need for proactive risk management and sustainable application.
Threats and opportunities
China’s ESG initiatives present both challenges and opportunities as the country advances toward sustainable growth and investment. The Chinese government has set ambitious goals to establish national ESG disclosure standards by 2030, and recently, the Ministry of Finance sought public input on draft guidelines for corporate sustainability disclosures, marking a significant step in ESG reporting policy. By 2027, China plans to introduce foundation regulations, with full standards expected by 2030. Additionally, China aims to peak and stabilize carbon dioxide emissions by 2030 and reach carbon neutrality by 2060. This phased approach, which gradually includes listed, private, and smaller enterprises, provides a major opportunity for widespread ESG adoption across the economy.
Despite these positive developments, China’s ESG ratings often lag other emerging markets, particularly in areas like corporate governance, human rights, and consistent supply chain emissions reporting. The new draft standards are intended to bridge these gaps by enhancing data consistency and transparency, especially in high-impact sectors, so SOE, large corporations, and small corporations can align with China’s 2030 and 2060 sustainability targets.
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ESG in other Asian countries
ESG varies all across Asia. We have gathered the most important information about politics, trends, opportunities, and threats in the different Asian countries.
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