Chinese regulator hints at compliance with ISSB disclosures

The China Securities Regulatory Commission (CSRC) is preparing reporting standards that would align with new disclosure rules developed by the International Sustainability Standards Board (ISSB), CSRC vice chairman Fang Xinghai revealed at the Boao Asia Forum Annual Conference held on 20-22 April 2022.

Xinghai said in a recent speech that the Chinese regulator encouraged companies to disclose environmental, social and governance (ESG) risks and opportunities in line with investor demand.

He added the CSRC would report disclosures by Chinese companies to the International Organisation of Securities Commission (IOSCO), though the disclosure framework and extent of alignment with the IFRS Foundation’s International Sustainable Standards Board (ISSB) remains to be seen.

Xinghai said that on the topic of disclosures, CSRC’s decisions would reflect the current situation and needs of Chinese companies, adding that such companies would need to “gradually adapt” to international ESG standards.

The CSRC is requesting disclosure of ESG information by Chinese companies on a voluntary basis, though synchronisation with ESG standards or mandatory disclosure would be the next thing to consider, Xinghai said.

Increasingly, investors expect ESG data to be reliable and transparent.

China is responsible for a significant portion of green technology manufacturing globally, including that of batteries and renewable infrastructure.

These capital-intensive activities may well depend on the region attracting and maintaining capital flows.

In March, the ISSB published its first set of proposals for investor-driven reporting standards. They are currently open to feedback with a deadline of 29 July and will be finalised by the end of 2022.

The proposals set out criteria for disclosing material information on a company’s sustainability-related risks and opportunities “that is necessary for investors to assess a company’s enterprise value.”

In China, the CSRC recently issued guidelines for listed companies to scale efforts on managing investor relations, which incorporate information on ESG disclosure within communications with shareholders.

China’s Ministry of Finance called on Chinese businesses to feedback on ISSB’s proposals by 15 June, with regards to their domestic requirements.

It will submit feedback to the ISSB, it said.

Domestically, the Chinese Ministry of Ecology and Environment released its Measures for Enterprises to Disclose Environmental Information by Law to regulate certain enterprises disclosure of environmental data by law. They came into force in February.