Zhang Xuechun: How to Promote the Implementation of ESG in China?

Source: World Finance Forum (WFF)

Published: 2021-07-19

On 29 June 2021, a seminar on “Sustainable Development and Theoretical Standard System of ESG Against the Background of Double Carbon Goals”, jointly sponsored by the World Finance Forum and the Institute of Global Sustainable Development of Tsinghua University and co-organized by Zhongchengxin Green Finance Technology (Beijing) Co., Ltd., was held in Beijing. 

Zhangxuechun, Deputy Director-General of the Research Bureau of the People’s Bank of China (PBOC), attended the seminar and said that when President Xi Jinping was in Zhejiang in 2005, he put forward that “Green water and green mountains are also golden mountains and silver mountains”. Last year, President Xi raised the concept of the “3060 Target”, which reversed the understanding of the whole society on the issue of climate change. The framework of ESG is also in line with China’s traditional concept of “Harmony Between Man and Nature”. The Chinese government should attach great importance to sustainable development, but top-down design should be combined with bottom-up promotion, especially for ESG.

Zhangxuechun pointed out that the key to achieving the double carbon goal is to implement it. The implementation of ESG requires the combination of the top-level design from top-down and the behavior of market players from bottom-up, with its three most important aspects being: (1) Formulating information disclosure standards; (2)Establishing information verification mechanism; and (3) Forming corresponding incentive mechanism.

Zhang said that relevant ministries and commissions should explore unified ESG information disclosure standards: First, determine the ESG evaluation indicators for related enterprises and formulate the benchmark contents of relevant information disclosure; Second, unify ESG information disclosure methods; Third, during the transition phase, the coordinating role of local governments should be brought into play. Under the guidance of the overall national policy, local standards can be unified on a pilot basis and gradually integrated into international standards.

Zhang stressed that ESG data such as corporate carbon emissions are the basis for formulating climate change policies and green finance policies. Electronic data reporting, verification and management methods will effectively improve the accuracy and timeliness of reported data. Non-government agencies or semi-government agencies can be allowed to disclose such information, so that enterprises will no longer do it themselves. We should establish a direct reporting system, including carbon data, taking data release as an important starting point for improving data quality, serving policy-making and promoting public participation.

Zhang mentioned that China still needs policy directions from fiscal, tax and financial sectors to create a friendly environment for ESG investment. Relevant national ministries and commissions should issue laws and regulations on green development to promote the linkage between the economic interests of enterprises and their environmental protection, social responsibility and corporate governance from both administrative and market aspects. For example, ESG information disclosure can showcase the enterprise's own image and enhance their influence and competitiveness; It can meet their risk assessment needs from financial institutions, and is conducive to obtaining financing and reducing financing costs; It can also improve their management level and resource utilization and reduce their emission costs.