Three Cities Take Lead on ESG Policies in China

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China’s pursuit of its “dual-carbon” objectives has brought ESG (environmental, social, and governance) considerations into the forefront Effective economic advancement hinges on robust urban management, industrial modernization, and  sustainable business evolution. Recently, Shanghai, Beijing, and Suzhou have each rolled out initiatives to drive ESG growth from a district-level perspective.

At the beginning of 2024, China’s three main stock exchanges jointly unveiled the “Guidelines for Self-Regulation Supervision of Listed Companies – Draft for Sustainable Development Reports.” This move aligns with the State-owned Assets Supervision and Administration Commission’s push to elevate the quality of centrally-owned enterprise-controlled listed firms, as outlined in their 2023 work plan.

Shanghai spearheaded the nation’s inaugural ESG regional strategy. On March 1st, Shanghai introduced its pioneering ESG regional blueprint, titled “Accelerating the Strengthening of Environmental, Social, and Governance (ESG) Capacities of Foreign-Related Enterprises: A Three-Year Action Plan (2024-2026).”

The plan aims to establish an ESG ecosystem for foreign-related enterprises by 2026, laying the groundwork for corporate ESG reporting systems. It seeks to bolster ESG proficiency among foreign-related enterprises, aiming for comprehensive ESG disclosure among state-owned holding listed companies engaged in foreign operations and a significant uptick in ESG disclosure rates among private listed companies.

Key components include:

  • Enhancing enterprise ESG capabilities,
  • Boosting ESG market efficiency, and
  • Fine-tuning the ESG service framework.

The plan delineates 12 specific tasks, leveraging the leadership of state-owned, private, and foreign-funded enterprises in the ESG sphere while fostering international collaboration.

Beijing has also proposed “ESG pilot” initiatives. On March 15th, Beijing unveiled the “Implementation Plan for Advancing the High-quality Development of Environmental, Social, and Governance (ESG) Systems in Beijing.” It proposes the establishment of “ESG pilot” programs to refine Beijing’s ESG development policy framework by 2027, aiming for a 70% ESG disclosure rate among listed companies in Beijing. The policy  also aims to enhance ESG certification and rating levels, enrich ESG practices, and fortify ESG-related standards. By 2035, Beijing envisions its ESG system’s high-quality development transitioning to a rule-of-law track, marked by comprehensive information disclosure, a robust ESG ecosystem, an advanced rating system, diverse ESG practices, and an effective regulatory regime, positioning Beijing as a national and international leader in ESG development.

Key elements include:

  • Strengthening ESG information disclosure,
  • Developing the ESG ecosystem,
  • Supporting the development of a high-level ESG rating system,
  • Expanding and deepening ESG practices,
  • Promoting ESG pilot projects, and
  • Establishing an effective regulatory framework

Suzhou hosted the ESG Industrial Development Promotion Conference and issued two pivotal documents. On March 19th, the Suzhou Industrial Park hosted the ESG Industrial Development Promotion Conference to accelerate the consolidation of ESG elements within the park’s industrial chain.

During the conference, Suzhou Industrial Park unveiled two documents: the “Action Plan for ESG Industrial Development in Suzhou Industrial Park” and the “Several Measures to Promote ESG Development in Suzhou Industrial Park.” The action plan outlines six major projects and 13 specific tasks, focusing on optimizing spatial layout, nurturing operating entities, fostering innovative development, integrating applications, fostering international cooperation, and cultivating a development ecosystem. The latter document provides detailed policy support, particularly in terms of financial incentives. Notably, qualifying ESG projects in the park can receive up to 5 million yuan as a settlement reward, with an additional 3 million yuan available in rent subsidies for eligible projects at the Suzhou Industrial Park ESG Industry Innovation Center.

These initiatives underscore the integration of ESG considerations into China’s “dual-carbon” and high-quality development agendas, with a focus on enhancing ESG reporting and ratings. All three cities prioritize constructing an ESG ecosystem, government support, enterprise capacity building, ESG practice promotion, and regulatory system establishment.