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Mainland China’s stock exchanges issue first guidelines on corporate sustainability disclosure

Mainland China’s three main stock markets have released their first guidelines for listed companies to disclose their sustainability-related information, a landmark in the country’s progress towards achieving a sustainable economy and embracing the global environmental, social and governance (ESG) boom.


The Shanghai Stock Exchange (SSE), Shenzhen Stock Exchange (SZSE), and Beijing Stock Exchange (BSE) published separate guidelines on corporate sustainability disclosure and started seeking public opinions on Thursday.


According to the guidelines from the SSE and SZSE, constituent companies of the SSE 180, STAR 50, SZSE 100, and ChiNext indices, as well as those listed both home and overseas, are subject to compulsory reporting requirements, while other listed companies are encouraged to report on sustainability on a voluntary basis.

 

Companies listed on the BSE, which are mostly small and medium-sized enterprises, are also encouraged to submit sustainability reports voluntarily rather than being forced to.

The release of the guidelines was aimed at “standardising the information disclosure of listed companies’ sustainable development, guiding listed companies to practice the concept of sustainability, and promoting the high-quality development of listed companies,” said BSE in a statement explaining the background to the guidelines.

 

The guidelines encourage listed companies on the three stock exchanges to analyse and disclose their sustainability-related information based on a framework comprising four core areas – governance, strategy, risk management, and metrics and targets – to help investors and key stakeholders fully understand their actions on sustainable development.

 

On environmental information disclosure, SSE and SZSE have introduced key topics including biodiversity and circular economy, and strengthened the requirements for listed companies to disclose their carbon emissions. As well as disclosing their governance and strategies related to climate change, the companies must also divulge what they are doing when it comes to climate adaptation, transition plans, total greenhouse gas emissions, emission-reduction measures, and opportunities related to carbon neutrality.

 

The guidelines also require companies to disclose what they are doing to support China’s national development strategies, such as rural revitalisation and innovation-driven development, in their sustainability reports.

 

Firms should also disclose their anti-corruption, anti-bribery, and anti-unfair competition progress in the corporate governance information disclosure category.

 

The release of the guidelines signals mainland China’s determination to improve its economic sustainability, tackle climate change and environmental issues, and catch up with its global peers in ESG reporting.

 

Hong Kong Exchanges and Clearing (HKEX) published a consultation paper last April proposing to mandate all listed companies to provide climate-related information in their ESG reports starting from January 1. The implementation was later postponed by one year to allow issuers more time to familiarise themselves with the new requirements.

 

The guidelines released on Thursday provide more breathing space for mainland China’s listed companies, as those subject to compulsory reporting are not required to release their sustainable development reports for calendar year 2025 until April 30, 2026.

 

The newly released guidelines are more relaxed on climate-related disclosure too – companies are only encouraged to disclose their indirect carbon emissions in the value chain, known as Scope 3 emissions. Under the HKEX proposal, such disclosures are compulsory, after a two-year transition period.

 

According to data from the SSE, in 2023 a total of 1,023 companies listed in Shanghai disclosed their corporate social responsibility (CSR) reports, ESG reports or sustainable development reports for the previous year, a little under half of all the companies listed on the bourse.

 

“We believe the document is crucial for [listed companies] that have not yet reported on sustainability and ESG, as further proliferation of reporting requirements on all companies is expected,” said Leo Ho, an analyst at Daiwa Capital Markets, referring to the new guidelines in a report on Friday.


Almost all of the constituents companies of the STAR 50 Index, over 90 per cent of SSE 180 constituents, and probably all dual-listed companies have already published CSR, ESG, or sustainability reports, signalling the high preparedness of mainland Chinese listed companies, according to Daiwa.

 

However, it is likely that less than 500 listed companies will be covered by the compulsory reporting requirements under the newly released guidelines, it found.

 

“Hence, we see limited disclosure burden for the A-share market in general. However, some players may have to enhance or refine disclosure in certain areas to fulfil the latest requirements of the draft,” said Ho.


By Yujie Xue

https://www.scmp.com/business/china-business/article/3251570/mainland-chinas-stock-exchanges-issue-first-guidelines-corporate-sustainability-disclosure

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