State of ESG regulation and investment outlook in China

With the growing importance of environmental, social and corporate governance (ESG) and the high level of globalisation in capital and supply chains, the scope of ESG regulation is no longer confined to listed companies, the traditional targets.

Additionally, an increasing number of investors are developing a keen interest in ESG and are eagerly planning their next moves, while their investment philosophy has also steadily shifted from “passive compliance” to “active empowerment”. This article analyses the ESG regulatory framework and the ESG investment environment in China, followed by a review of ESG investment trends.

Regulatory Overview

ESG regulation in China is being continually explored and deepened, but no uniform or explicit regulatory standards have yet taken shape.
For listed companies, the Code of Corporate Governance for Listed Companies, revised by the China Securities Regulatory Commission (CSRC) in 2018, includes a specific chapter covering the “stakeholders, environmental protection and social responsibility” of listed companies.

The Standards for the Contents and Formats of Information Disclosure by Companies Making Public Offering of Securities No. 2: Contents and Formats of Annual Reports, revised in 2021, also includes a separate section setting out requirements for disclosures relating to “environmental and social responsibility”.

These regulations have provided requirements for ESG information disclosure of listed companies, but legislatively there was much room for improvement in terms of systematic ESG information disclosure guidelines or standards.

Learn more: China Business Law Journal