Chinese Enterprises Explore Sustainable Development, ESG Mainstreaming Trend Appears

The report of the 20th National Congress of the Communist Party of China pointed out that nature is the fundamental condition for human survival and development. Respecting, adapting to, and protecting nature is essential for building China into a modern socialist country in all respects. We must uphold and act on the principle that lucid waters and lush mountains are invaluable assets, and we must remember to maintain harmony between humanity and nature when planning our development.

Since July 2016, the People's Bank of China and seven other departments issued the "Guiding Opinions on Building a Green Financial System", requiring the establishment of a mandatory system for listed companies to disclose environmental information, ESG (Environmental, Social, and Corporate Governance) has gone through the initial confusion and confusion, becoming an unavoidable topic and having to make choices. The value and vitality unleashed by ESG are also feeding back enterprises through brand image, capital investment, and other forms, promoting better development of enterprises.

"At present, some listed companies in China have made good practices in environmental, social and governance levels. If enterprises want to make full use of ESG, they need to actively respond to the requirements of sustainable development and reserve momentum for future development," said Wang Yao, president of the Green Finance International Research Institute of the Central University of Finance and Economics.

According to a report from the China ESG Research Institute, there were 872 A-share listed companies issuing ESG related reports in 2018 and 1130 in 2021. According to the analysis of the China Association of Listed Companies, as of April 30, 2022, a total of 1366 listed companies (excluding newly listed companies in 2022) have disclosed their 2021 social responsibility reports on CNINFO, accounting for 29.42% of all listed companies.

In fact, whether it is a large state-owned enterprise or an emerging private enterprise, for many years, public welfare, employee care, love for green, and internal management improvement have been regarded as the basic choices for long-term development.

In the ESG evaluation system, public welfare is an important component of 20 to 30 projects in the three dimensions of Environmental, Social, and Governance. Therefore, it is important to recognize that public welfare is not only an output of enterprises to society, but also a positive input from society to enterprises, which can promote the establishment of a brand and gain recognition. At the same time, enterprises should also be encouraged to use ESG management systems to regulate their "honest" ESG behavior, making such behavior an intangible capital for enterprise development.

As a practice made by enterprises in the social dimension, public welfare actions should be firmly established among all employees, especially management personnel, through various channels such as training and education, learning and publicity. Integrating public welfare concepts into corporate culture genes can create a public welfare atmosphere throughout the entire enterprise.

In ESG, E represents the environment, which is the most important component and a key foundation for quantitative analysis. The key expression of the environment is green and low-carbon development.

From emphasizing environmental impact to comprehensive sustainable development, although ESG started relatively late in China, it has developed rapidly. Over the past six years, China has gradually found a path for the development of ESG in China that is both current and future oriented, and a corresponding evaluation system has also been established.

With the consent of the State Council, on August 31, 2016, six departments including the People's Bank of China and the Ministry of Finance jointly issued the "Guiding Opinions on Building a Green Financial System", proposing a series of incentive measures to support and encourage green investment and financing, while emphasizing the important role of environmental information disclosure;

In 2018, the revised "Governance Standards for Listed Companies" by the China Securities Regulatory Commission established the basic framework for environmental, social responsibility, and corporate governance information disclosure; In October 2020, the Ministry of Ecology and Environment, the National Development and Reform Commission, and the People's Bank of China jointly issued the "Guiding Opinions on Promoting Investment and Financing for Climate Change Response", guiding more social funds to enter the field of climate change response;

In December 2021, nine ministries jointly issued the "Notice on Conducting Climate Investment and Financing Pilot Work", officially launching the climate investment and financing pilot work;

At present, there is a lack of standardization and specialized guidance for ESG information disclosure in China, and companies release ESG reports on a voluntary basis. This year, the State owned Assets Supervision and Administration Commission of the State Council established the Social Responsibility Bureau and formulated and issued the "Work Plan for Improving the Quality of Listed Companies Controlled by Central Enterprises". The relevant measures of the State owned Assets Supervision and Administration Commission have clarified the future work direction of central enterprises, provided goals and guidance for strengthening social responsibility awareness and establishing a sound ESG governance system for listed companies controlled by central enterprises, and also injected strong impetus into promoting the development of ESG in China.

(excerpted from the Beijing News) Website of the online platform: https://baijiahao.baidu.com/s?id=1748982921516106670&wfr=spider&for=pc ）