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12 December 2019

China risks missing own deadline on environmental disclosure

Mandatory disclosure would provide standardised and comparable data to make investment decisions but is receiving push back from companies because of high costs.

Bloomberg/Qilai Shen

China is running up against its own deadline to require its more than 3,000 listed companies to disclose environmental metrics, reported Bloomberg.

Despite a goal to kick off the programme next year, there are still no guidelines in place to force companies to make available information on measures for environmental sustainability, social impact and good governance.

An official from the Shenzhen Stock Exchange said they had not seen the basic framework for environmental, social and governance (ESG) disclosure and so the bourse was unable to draft detailed rules on what companies would need to reveal.

Additionally, a Shanghai Stock Exchange official said they are waiting for directions from the China Securities Regulatory Commission, which oversees the programme.

At stake is the chance for Chinese companies to compete for the more than $30 trillion of funds that have been funnelled into sustainable investing worldwide. The information may be crucial in China, where investors increasingly use such data to avoid financial landmines, especially as risk appetite shrinks amid a slowing economy.

Mervyn Tang, Global Head of ESG Research at Fitch Ratings, said, “There is still discussion on what exactly companies have to disclose, we have yet to see a fully flushed set of indicators, which could make it difficult to implement mandatory disclosures by next year as firms need time to build systems to collect and report data.”

Hong Kong Exchanges & Clearing sought feedback in May 2019 on a proposal to have all listed companies publish on ESG-related risks. Although companies have argued the requirements are costly and time-consuming, a disclosure framework would force many firms to start collecting and reporting data.

Out of the more than 1,400 companies listed in Shanghai that published 2018 financial reports, over 570 firms voluntarily disclosed environmental information, according to the bourse. Shenzhen exchange said 666 companies disclosed environmental information in their 2018 semi-annual reports.


RELATED STORIES: environmental disclosure Shenzhen Stock Exchange Shanghai Stock Exchange China Securities Regulatory Commission ESG





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