CHINADAILY：Mainland A-share market firms should improve ESG reporting: Experts

Environmental, social and governance reporting among listed companies on the Chinese mainland’s Ashare market needs to improve - particularly at a regulatory level, industry leaders and experts say.

Zhang Guanghua, chairman of China Alliance of Social Value Investment, said on Thursday there is a growing awareness and recognition of ESG reporting among listed companies on the mainland. But Zhang said, there is still a long way to go before these new ideas could be put into practice.

Compared with overseas-listed companies, listed companies on the A-share market lag far behind in ESG reporting in terms of quality and quantity

Zhang Guanghua

chairman of China Alliance of Social Value Investment

“Compared with overseas-listed companies, listed companies on the A-share market lag far behind in ESG reporting in terms of quality and quantity.

“We have nearly 4,000-listed companies on the stock market, but only fewer than 1,000 have released their corporate social responsibility reports.

“And there is not a sound system on information disclosure,” he told ESG Investing Frontiers forum in Shenzhen on Thursday.

At the present time, data on ESG among listed companies mainly comes from the companies themselves, but some don’t attach enough importance to the area, he explained.

“This requires greater attention and support from regulators. Regulatory departments should make more specific and standardized information disclosure requirements on listed companies to prompt them to pay more attention to ESG development,” said Zhang, who is also a former chairman of Bosera Funds.

He also urged that ESG evaluation system to develop standards which match the situation in the mainland market.

“Developed countries already have a mature ESG evaluation system and standards and many international organizations use their models to evaluate A-share companies. However, due to different conditions between the mainland and developed countries, the mainland Chinese A-share market has big differences from the capital markets of those countries,” Zhang explained.

“If overseas models are used to evaluate A-share companies, it cannot accurately reflect the real situation of ESG development among the listed companies.

“Therefore, it is vital for us to establish a system that is in line with our national condition and the real situation of A-share market.”

Zhang’s view was echoed by He Jibao, director of the comprehensive research institute at the Shenzhen Stock Exchange.

Regulators and investors are the driving forces for listed companies to enhance ESG reporting. Regulators play a more important role when ESG development is still in its early stage, he said.

As the Chinese mainland accelerates the pace of opening up its capital markets, its ESG reporting policies should also be developed to integrate with international markets, He Jibao said.

“Polices on information disclosure will gradually turn from voluntary to mandatory,” he said.

Efforts have been made on the Chinese mainland to foster ESG development in recent years. In August 2016, the People’s Bank of China, or the central bank, and other six Chinese government departments unveiled a guideline on establishing a green finance system.

In 2018, China Securities Regulatory Commission   revised governance guidelines for listed companies, establishing a basic framework for ESG reporting.

“From a broad perspective, the mainland capital market is going in a good direction. How fast it will go will depend on the efforts and appeal from all sides,” He Jibao added.

ESG reporting is becoming increasingly important in the global corporate world as investors demand more information about companies - including the social and environmental risks facing them.

sally@chinadailyhk.com