Expert: China urgently needs ESG system

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China urgently needs to establish an environmental, social and governance (ESG) framework in order to establish a green financial system to regulate sustainable investment behavior, to promote green and high-quality development of enterprises, and to achieve peak carbon and carbon neutrality goals, said Wang Jinnan, at the ESG Global Leaders’ Summit last month.

Wang, president of the Ministry of Ecology and Environment’s Environmental Planning Institute (also known as the Chinese Academy of Environmental Planning) and academician at the Chinese Academy of Engineering, gave a speech at the event titled “Building China’s ESG System and Promoting Corporate Green Governance”.

The 2nd ESG Global Leaders’ Summit, organized by Sina Finance and CITIC Press Group, was held from June 28 to 30, with a theme of “promoting global ESG development and building a sustainable future”.

Wang pointed out that the concept of ESG investment has recently become a valuable indicator of sustainable development and has gained increasing importance as one of the mainstream investment strategies globally.

ESG emphasizes that businesses should not only focus on financial performance but also measure corporate value from the perspective of the environment, society and governance. Also, the practice and performance of companies in fulfilling social responsibility should be quantified, compared and continuously improved.

To build an ESG system in China, Wang suggested to first enhance the importance of ESG when building environmental governance systems — combining the implementation of environmental information disclosure and environmental credit evaluation systems of enterprises and government institutions to strengthen the application of ESG evaluation results. He also proposed guiding local governments and businesses to improve supporting policies and coordination among different sectors.

Wang’s second suggestion was to further improve the top-level design of ESG evaluation systems by promoting the introduction of guidelines on quantitative and comparable ESG information disclosure frameworks and emphasize the innovation and construction of environmental and carbon-neutral related indicators resulting in an increase in the supply of green innovative products by financial institutions. He also called for more awareness of corporate green governance.

He went on to emphasize the continuous improvement of the corporate environmental information disclosure and performance reward system. Businesses can seek technical support from third parties to collect, monitor and analyze their ESG data, according to Wang.