The China Ministry of Finance issued a draft sustainability reporting standard to establish a mandatory ISSB-aligned disclosure regime for Chinese companies by 2030. The draft is named the Corporate Sustainability Disclosure Standards: Basic Principles, and it sets out general principles, disclosure objectives, and information quality requirements for the country's reporting framework. The draft was released on 27 May 2024 with the aim of catching up with its global peers in environmental, social, and governance (ESG) reporting.

The issuance of the Basic Principles draft may present new opportunities for asset managers, private credit firms, and private equity firms to invest in high ESG-performing companies based in China that may benefit from these enhanced disclosure requirements. 

Let’s look at this corporate sustainability disclosure draft for Chinese companies in detail. 

What is China’s unified corporate sustainability disclosure guideline?

The corporate sustainability disclosure guideline or draft is a set of regulations that would require companies formed in China to disclose information on governance, environmental, and social topics by 2027, with the plan of establishing nationwide standards by 2030. It includes their sustainability-related governance, a range of ecological topics such as climate pollution, marine biodiversity, resource use, and social topics including their own workforce, consumer protections, community relationships, and supply chain management. 

The draft follows the core International Sustainability Standards Board (ISSB) and specifies that sustainability disclosures should include the four key elements: governance, strategy, risks/opportunities, and metrics/targets. 

The guidelines on the draft include a number of rules, such as one that companies must report on the environmental impact of their activities, the risks and effects of those activities on their business, and disclose the indirect carbon emissions in their value chains. 

All of these reporting requirements can help impact investors to identify companies that align with their specific ESG goals and fulfill ESG-related compliance reporting requirements. The draft standard does not include any assurance requirements, nor does it state an effective date. However, the drafting note states that climate standards will be published by 2027, and the full set of sustainability standards will follow by 2030. 

Next Steps

The Ministry of Finance for China has opened a consultation on the draft standard that will run until 24 June.

While you’re here…

Major government initiatives like this can present opportunities for impact investors in asset management, private credit, and private equity. Chinese companies that perform well on ESG metrics can benefit from new disclosure regulations such as China’s unified corporate sustainability disclosure guideline. 

However, identifying opportunities early presents a significant data challenge for private credit and equity firms. This is an area where Auquan can help. 

Auquan uses advanced AI to generate material insights on any entity worldwide — public or private — and fine-tuned for your individual investment and lending workflows. Auquan sources and processes information from dozens of languages, including Mandarin.

Let’s explore how Auquan can help you and your team eliminate tedious and time-consuming manual data work and focus more on what you do best: making strategic decisions ahead of the market.