Chinese stock exchanges eye mandatory climate disclosures for listed companies

The Shanghai, Shenzhen and Beijing stock exchanges have released draft guidelines for corporate sustainability disclosures – a landmark move that could mandate hundreds of Chinese-listed companies to report on their climate impacts and strategy.

Each of the stock exchanges has published its own draft guidelines for sustainability reporting, though all have very similar characteristics. As a trial, disclosures will be made mandatory for companies in the SSE 180 Index, Shenzhen Stock Exchange 100 Index and GEM Index as well as those listed simultaneously in Chinese and foreign stock exchanges – while remaining voluntary for the rest of listed companies. 

The draft published (in Chinese) by the Shanghai Stock Exchange includes annual Scope 1 and 2 emissions reporting, as well as comprehensive climate adaptation assessments and governance disclosures. Any use of carbon credits should also be disclosed, and companies are encouraged (though not mandated) to get their carbon data audited. Scope 3 emissions reporting will remain voluntary for the time being.

Focus on sustainability governance and climate adaptation

Companies will be required to perform a materiality assessment and disclose its methodology and results. Other mandatory disclosures include climate-related physical and transition risks as well as the strategies employed to mitigate them – and a strong focus on sustainability governance.

For example, the draft states that entities included in the scheme will have to “establish and improve corporate governance structures and internal systems” to ensure sufficient professional capabilities. They will also be required to report on the specific institutions (such as boards of directors and any sustainability committee or sub-committee) created to manage the strategy, as well as their sustainability skills – an increasingly important aspect of sustainability governance.  

The draft also focuses thoroughly on climate adaptation and resilience, asking companies to perform scenario analysis and assess the impact of climate change on their strategies and business models. In performing this exercise, listed firms should also disclose how they plan to cope with these impacts, and any major uncertainties that emerged during the assessment.

“The guidelines aim to better exert the hub function of the capital market, promote the improvement of the quality of listed companies, investment value and investor return levels by strengthening the disclosure of sustainable development information (...) and achieve the sustainable development of economy, society and environment,” the Shanghai Stock Exchange said in a statement.

The stock exchanges are now accepting feedback on these drafts until February 29, 2024.