New Zealand Company Leads German-Funded Climate And Environmental Disclosure Project In China
Capacity Building and Piloting of Climate and Environment Risk Disclosures in Jiangsu Province, a GIZ-funded project, kicked off on June 15, 2021. Due to the constraints of the COVID-19 pandemic, an online workshop was held. International and national experts attended the workshop. The international team is led by Dr Yinpeng Li, Chief Scientist from CLIMsystems, located in Hamilton, New Zealand, and supported by other staff at CLIMsystems and subject experts from BSI and SLR in the USA and UK, respectively. The national team is led by Professor Qian Ye of Beijing Normal University (BNU) and the Executive Director of IRGP (Integrated Risk Governance Project). Other national team members come from BNU, CMA (China Meteorological Administration), CASS (Chinese Academy of Social Sciences), and other universities in China. Ms Hu Qiying, Head of GIZ Jiangsu, attended and delivered a speech. Ms Hu said, in recent years, the international community has realised that disaster risk reduction (DRR) and climate change adaptation (CCA) both share a common focus: reducing the vulnerability of communities and contributing to sustainable development. It is, however, how to incorporate DRR, CCA, and SDG (Sustainable Development Goals) efficiently and effectively is a great challenge not only for the academic community but also for both policymakers and business decision-makers.
United Nations Principles for Responsible Investment (PRI) has since 2006 provided a voluntary framework that investors can incorporate climate and Environmental, Social and Governance (ESG) issues into their decision-making and ownership practices. Large international asset managers, most of which are PRI signatories, have already stepped up their ESG engagement through China's Hong Kong and New York-listed large-cap companies. In addition, the Financial Stability Board (FSB) established the TCFD (Task Force on Climate-related Financial Disclosures) to develop recommendations and guidance for more effective climate-related disclosures that could promote more informed investment, credit, and insurance underwriting. This GIZ-funded project is aiming to support China in developing its climate and environmental disclosure law.
The movement toward Chinese companies disclosing climate and ESG risks is of considerable significance. First, for investors, the disclosure of climate risk can help them more accurately assess the value of the enterprise, discover investment opportunities, and avoid investment risks. Second, for the central bank and financial regulatory authorities, climate information disclosure can provide a basis for analysing and resolving climate-related financial risks. Third, for companies themselves, climate information disclosure can help them better identify, evaluate, and manage climate-related risks and opportunities and form more resilient developmental pathways.
In his presentation of the project background, research content, and implementation plan, Dr Yinpeng Li pointed out that so far, there is no mandatory obligation to disclose climate-related financial and non-financial information for listed companies in China. Recently, learning from developed countries, seven major Chinese regulatory agencies have stated their intention to improve existing sustainability reporting regulations. Legal foundations also support regulations in China through ESG reporting requirements mandated in stock exchanges. In May 2021, the China Securities Regulatory Commission (CSRC) issued the revised "Measures for the Administration of Information Disclosure of Listed Companies." The revised version has improved the essential requirements and management system of information disclosure. In the long run, there is a clear leapfrogging opportunity for China to help accelerate climate action by making reporting mandatory. The companies' adequate climate and environmental risk disclosure will benefit China's ecological civilisation policy and support implementing the new emissions trading scheme. Developing a sound ESG reporting system that provides comparable emission data and climate-related practices would set a strong foundation for China's journey towards a low-carbon green economy.
Meanwhile, China's 2060 carbon-neutral goal will intensify the focus on climate-related corporate reporting and transformation. By recognising, on the one hand, due to lacking regulatory and well-trained personnel, climate and environmental risk disclosure in China are still in its infancy; on the other hand, with the rapid movement of climate and environmental disclosure regulations and practices in the developed countries, the gaps in the climate and ESG knowledge, data, and methodologies solutions are rapidly emerging. To specifically target these challenges, the objectives of this GIZ-funded project are as follows:
- Co-develop a guidance document for the exchange of methods on climate and environment risk disclosures for Chinese enterprises;
- Raise awareness of the materiality of climate and environmental risk disclosure and related international and national best practice;
- Build capacity in Jiangsu Province on climate and environment risk disclosures;
- Pilot the guidance document by training the trainers' workshop on climate and environmental risk disclosures for selected enterprises in Jiangsu.
The project's outcome will include: a climate and environmental disclosure guidance document, a training curriculum; and, policy recommendations to support the practice of climate and ESG risk disclosure in Jiangsu province, envisioning their broader application in coming years across China.