As part of the measures to facilitate robust capital market development, the stock exchanges of Shenzhen, Shanghai and Beijing simultaneously unveiled trial guidelines for sustainability reporting on 12 Apr 2024, earlier than the market expected following the draft released in February 2024.

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Key takeaways

🟩 New standards to enhance the transparency and comparability of ESG data and support stronger capital market regulation

🟩 Most of the companies mandated to make annual sustainability reports (hereafter “covered companies”) have been compliant, with slightly bigger gaps seen in Basic Materials, Healthcare, and Industrials sectors

🟩 New framework in line with global standards in terms of covered topics and reporting approach, places greater emphasis on climate change, while some social and governance aspects are broadly outlined

🟩 Majority of covered companies have already aligned with Global Reporting Initiative or Hong Kong Exchange’s framework, making it easier for them to adopt the new framework, while data has indicated significant gaps in the disclosure of key topics like GHG emissions and water resources

🟩 Guidelines recognize the costs involved in the collection and analysis of ESG data but warns against greenwashing

🟩 Framework to apply from FY2025. Covered companies do not need to align in FY2023 reports but will reference new framework in FY2024 reports even with voluntary reporting

🟩 New rules might prompt re-valuation of some shares as investors integrate sustainability factors in investment decisions