The Shanghai and Shenzhen North Stock Exchange released the ESG report of listed companies

Strengthen the disclosure of information related to sustainable development and enhance the international influence of A-shares.

In order to further improve the quality of sustainability-related information disclosure, on April 12, the Shanghai Stock Exchange, the Shenzhen Stock Exchange and the Beijing Stock Exchange (hereinafter referred to as the "Shanghai and Shenzhen North Stock Exchange") issued the Guidelines for Sustainability Reporting of Listed Companies (hereinafter referred to as the "Guidelines"), which adopts a combination of mandatory disclosure and voluntary disclosure to establish a sustainable development information disclosure framework for listed companies, align with international requirements to strengthen climate change-related disclosure requirements, and clarify environmental, social and corporate governance disclosure topics.

Industry insiders believe that the Guidelines are an important milestone in the field of sustainable development, which will help provide standardized, comparable and high-quality information, highlight the investment value of high-quality companies, attract medium and long-term funds, and enhance the international influence of A-shares.

Strengthen the disclosure of sustainable development and accelerate the formation of a good market ecology

In order to thoroughly implement the spirit of the Central Financial Work Conference and the Several Opinions of the State Council on Strengthening Supervision and Risk Prevention and Promoting the High-quality Development of the Capital Market, and implement the requirements of policy documents such as the Opinions on Strengthening the Supervision of Listed Companies (Trial) issued by the China Securities Regulatory Commission, the Shanghai and Shenzhen North Stock Exchanges officially issued the Guidelines, which will be implemented from May 1, 2024.

The Guidelines consist of 6 chapters and 63 articles. In response to the more than 80 feedback opinions collected from all parties in the market during the public consultation process, the China Securities Regulatory Commission and the Shanghai and Shenzhen North Stock Exchanges attach great importance to and carefully study them, and most of them have been fully absorbed and adopted. Compared with the Consultation Paper, the Guidelines make the following adjustments:

The first is to appropriately relax some disclosure requirements. For example, disclosure is required before April 30, but it is not required to be disclosed at the same time as the annual report, so as to alleviate the pressure on listed companies to centralize the disclosure of annual reports and sustainability reports, and increase the exemption clause for quantitative disclosure of financial impact. The second is to increase the details of topics. The list of issues included is directly listed in the annex to the Guidelines for easy implementation by enterprises. The third is to clarify the disclosure requirements for different material topics. Topics that are clearly financially important need to be disclosed in accordance with the four-element framework of "governance-strategy-impact, risk and opportunity management-indicators and targets", and for issues that are only of impact materiality, they are required to be disclosed according to the relevant indicators of the specific issue. Fourth, improve specific disclosure requirements and textual expressions. For example, some topic chapters have been integrated and optimized, new disclosure requirements such as stakeholder management, due diligence, flexible employment, inclusive finance, and carbon emission trading have been added, and integrated disclosure of governance-related information has been allowed, and exemptions for retrospective adjustment of data have been added.

In terms of the implementation of the rules, the Guidelines clarify that companies that continue to be included in the sample indices of SSE 180, STAR 50, SZSE 100 and ChiNext during the reporting period, as well as companies listed at the same time at home and abroad, shall disclose the 2025 Sustainability Report for the first time by 2026 at the latest, and if the company voluntarily discloses the 2024 Sustainability Report, the content of the report shall be consistent with the requirements of the Guidelines.

In terms of the disclosure framework, for financially important issues, companies should analyze and disclose them around four core contents: governance, strategy, impact, risks and opportunities, and indicators and objectives. In terms of specific topics, the Guidelines set up 21 topics such as climate change, pollutant emissions, ecosystem and biodiversity conservation, rural revitalization, innovation-driven, and employees, and set differentiated disclosure requirements for different topics through a combination of qualitative and quantitative, mandatory and encouraged.

Industry insiders pointed out that the release of the ESG report has brought investors a new perspective to analyze the quality of the company's growth and long-term development momentum. The illustrated analysis in the ESG report is more conducive to investors to understand the company's business development potential than the boring text in the annual report. At the same time, ESG disclosure can improve the company's own standard operation level, promote the sustainable and healthy development of the company and the economy and society, and further protect the interests of investors.

Regulators and exchanges work together to promote the optimal allocation of green resources

Achieving "carbon peak, carbon neutrality" and sustainable development is a profound change involving all economic and social fields, which requires the optimal allocation of financial resources to provide strong support. The Central Financial Work Conference held at the end of October 2023 called for five major articles, including "green finance".

In order to make more effective use of financial services to support the implementation of national strategies, promote green development, and actively fulfill social responsibilities, capital market regulators or self-regulatory organizations have actively issued a series of financial support policies, aiming to optimize resource allocation, so as to effectively promote sustainable and high-quality social and economic development. In November 2022, the China Securities Regulatory Commission (CSRC) issued a three-year action plan for promoting the improvement of the quality of listed companies (2022-2025), which required the establishment and improvement of a sustainable development information disclosure system, the formulation of a system of sustainable development information disclosure rules for listed companies based on the actual situation in the mainland, in line with international trends, and with Chinese characteristics, and a clear implementation path, which is planned to be gradually promoted in stages.

The Shanghai Stock Exchange said that in recent years, it has continued to guide listed companies to strengthen the disclosure of information related to sustainable development, and actively integrate green and sustainable elements in promoting the reform of the investment, financing and trading sides. By the end of 2023, a total of 1,020 listed companies on the Shanghai Stock Exchange had disclosed their 2022 social responsibility reports, ESG reports or sustainability reports, with a disclosure rate of 47%, and the number and proportion of disclosures reached a new high. The sample companies of the SSE 50 and STAR 50 Index have basically achieved full coverage, and the report disclosure rate of the sample companies of the SSE 180 Index has exceeded 90%.

The Shenzhen Stock Exchange has also successively launched the "White Paper on Environmental Information Disclosure of Listed Companies" and the "White Paper on Sustainable Development Information Disclosure of Listed Companies", guiding listed companies to strengthen their awareness of sustainable development information disclosure and actively practice the concept of sustainable development by sharing the sustainable development information disclosure practices and excellent cases of listed companies on the Shenzhen Stock Exchange.

The Beijing Stock Exchange said that it will give full play to the market function of the "main position", deepen the concept of sustainable development, accelerate the improvement of market construction results, promote innovative small and medium-sized enterprises to thoroughly implement the new development concept, actively green transformation, and actively contribute to the construction of a new development pattern and the promotion of high-quality development.

Do a good job in ESG rating and investment to promote the construction of a good sustainable ecosystem

In recent years, listed companies have actively disclosed social responsibility reports, ESG reports and sustainable development reports, the quantity and quality of reports have been continuously improved, the scale of the investment market related to sustainable, green and low-carbon development has continued to grow, and a good market ecology in which sustainable information disclosure and sustainable investment promote each other is accelerating.

Rather than relying solely on financial indicators to evaluate investment value, ESG investment concepts integrate the three core elements of environment, social responsibility and corporate governance into the decision-making considerations of investment institutions. This is not only a beneficial extension of traditional investment strategies, but also in line with the current "dual carbon" strategy and the trend of green development. The ESG investment concept further enriches the criteria for measuring the investment value of enterprises, enabling investors to more accurately identify high-quality investment targets with long-term sustainable development potential.

"ESG investing is an integrated approach to investing that includes any financial and non-financial factors that may have a significant impact on investment performance. Compared with impact investing, which focuses more on the combination of moral or ethical returns, ESG investment emphasizes the pursuit of both financial returns and non-financial return factors that affect the sustainable development of the company, such as environmental, social and corporate governance. Liu Ping'an, founder and chairman of Jin Changchuan Capital, pointed out in an interview with a reporter from the Securities Times.

In the next step, under the unified deployment of the China Securities Regulatory Commission, the Shanghai and Shenzhen North Stock Exchanges will do a good job in market training and other services, formulate more detailed disclosure guidelines in a timely manner, provide specific guidance for listed companies to implement the provisions of the Guidelines, and support relevant departments to do a good job in ESG rating, index development and investment, etc., so as to further enhance positive incentives and promote the construction of a good sustainable ecology. In addition, the three exchanges will also expand the scope of mandatory disclosure entities in a timely manner according to the implementation of the Guidelines, promote more listed companies to disclose high-quality sustainable development information, and promote the consolidation of the foundation for the high-quality development of listed companies.

Editor-in-charge: Wan Jianyi

Proofreading: Ran Yanqing

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