The recent high-level Central Economic Work Conference in Beijing laid out a comprehensive and ambitious workplan for China. One of the agreed-upon focus areas is to continue to “cut carbon emissions, reduce pollution, pursue green development and boost economic growth in a concerted manner, and ramp up the green transition in economic and social development”.[1] In an opinion piece for Caixin Global, UNEP FI co-authors Peiyuan Guo and Shouqing Zhu review China’s progress on environmental, social, and governance (ESG) disclosure in 2024, and point out policy directions and priorities for 2025. Here, they summarize their analysis and discuss how UNEP FI can support members in aligning with China’s disclosure policies while working with the government on the green transition.
ESG disclosure policy instruments lay groundwork for national disclosure system
The year of 2024 is sometimes dubbed in China as the “Year for Disclosure”, because several government policy instruments simultaneously set the country on a path for increased mandatory and voluntary sustainability information disclosure.
In February 2024, under the auspices of China Securities Regulatory Commission (CSRC), China’s three stock exchanges issued ESG reporting guidelines, mandating companies of the SSE 180 Index, STAR 50 Index, SZSE 100 Index, and ChiNext Index, and companies listed domestically and overseas to disclose their ESG data in 2026. CSRC also encourages other companies to publish ESG reports on a voluntary basis.
After a public consultation process, the Ministry of Finance (MOF) finalized the Basic Guidelines for Corporate Sustainability Disclosure in December 2024, putting forward general requirements for sustainability information disclosure by Chinese enterprises. In general, it follows the International Sustainability Standards Board (ISSB)’s disclosure framework, which requires companies to disclose information related to governance, strategy, risk and opportunity management, as well as indicators and targets. Unlike the ISSB Standard, which primarily takes a financial materiality perspective, MOF’s guidelines follow the principle of double materiality, which assesses ESG impacts on a firm’s financials as well as on ESG outcomes. The release of these guidelines is viewed as an important step in the development of a disclosure culture in China, because it marks the beginning of MOF’s plan to issue both the general standard for corporate sustainability disclosure (based on IFRS S1) and the climate-related disclosure standard (based on IFRS S2) by 2027, laying the foundation for building a national sustainability disclosure system by 2030.
Green finance further leveraged for green transition
In 2020 China announced its goal to reach carbon peaking by 2030 and carbon neutrality by 2060, and subsequently released a plethora of policies to set the economy towards that goal, including emphasizing green finance to achieve and accelerate the green transition. The People’s Bank of China (PBOC) and several other ministries issued policy instruments to encourage further development of green finance, including the “Guiding Opinions on Further Strengthening Financial Support for Green and Low-Carbon Development” and the “Opinions on the Role of Green Finance to Serve the Construction of a Beautiful China”.
The “Guiding Opinions” document, which was released by PBOC in conjunction with six other ministries in March 2024, calls for the full development of financial infrastructure, policies and standards, risk management practices, products and markets, and information disclosure. According to data from PBOC, China’s green loans and green bonds both grew at an average rate of over 20% in the past seven years since its initial guidance for establishing the green financial system in 2016, which has boosted China’s rise in areas of solar, wind, electric vehicles, batteries and other sectors. This new guidance aims to accelerate China’s momentum to become the world’s leader in all aspects of sustainable finance over the next five to ten years.
“Five Key Pillars” gaining momentum
China has focused on poverty reduction and rural revitalization over the past decade. As the median age in China has rapidly increased, pensions also receive significant attention. With the 4th industrial revolution gaining momentum, technological and digital finance is becoming a high priority as well.
In October 2023, a concept called the “Five Key Pillars” of a modern financial system emerged from China’s high-level Central Financial Work Conference. This new concept is commonly called “Five Major Articles” (五篇大文章) in Chinese and it refers to technology finance, green finance, inclusive finance, pension finance, and digital finance. In July 2024, the Central Committee of the Communist Party adopted an important decision on “Further Deepening Reform Comprehensively to Advance Chinese Modernization”, which directs financial institutions to explore innovative ways to finance projects in those five areas. In response to these calls, financial regulators and financial institutions accelerated their work. For example, the National Financial Regulation Administration (NFRA) urged banks and insurance companies to align their efforts with these areas by issuing the “Guiding Opinions on the Banking and Insurance Industry to Deliver on the Five Key Pillars”.
How can UNEP FI help?
As global frameworks to facilitate accelerated action on the goals set by the Paris Agreement and Sustainable Development Goals, the Principles for Responsible Banking (PRB) and Principles for Sustainable Insurance (PSI) are well aligned to support
Looking ahead, focus in China will stay with sustainability disclosure and financing the net zero transition. Although only indexed companies are required to make mandatory disclosures in 2026, it is expected that more leading companies will already begin to practice in 2025. Financial institutions that want to acquire a competitive edge will have to set targets on portfolio decarbonization and develop implementation plans. The guidance and tools that UNEP FI has developed can help PRB and PSI signatory members achieve their goals.
A similar program is being developed by UNEP FI to support implementation of MOF’s disclosure standards and PBOC’s green finance agenda, which is a key step in accelerating China’s green transition.
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