China Implements New ESG Disclosure Rules to Attract Foreign Investment

In a bid to align with global sustainability standards and attract foreign investment, China introduces new Environmental, Social, and Governance (ESG) disclosure rules for its largest corporations. The regulations mandate over 400 companies, included in key stock indexes, to publish sustainability reports by 2026, covering aspects like governance, strategy, energy transition plans, and environmental and societal impacts.

The move aims to standardise reporting in China and mitigate greenwashing risks for investors, according to Morningstar analyst Boya Wang. China’s initiative mirrors Europe’s Corporate Sustainability Reporting Directive, which came into effect this year.

The Chinese government hopes to reverse declining foreign investment trends, exacerbated by economic challenges like a property slump and geopolitical tensions with the US. China’s stock market has faced four consecutive years of declines, impacting sectors like green technology. An ETF tracking Chinese electric vehicle and renewable energy stocks plummeted by 15% last year, surpassing the broader market’s 11% decline, following a 42% slump in 2022.