4 key takeaways from our breakfast briefing on ESG regulation in China

Ascent Partners and the International Capital Market Association (ICMA) recently held an informal breakfast briefing in Central to discuss the recent ICMA and the China Central Depository & Clearing Co (CCDC) on their recent “white paper on ESG practices in China”

We were delighted to Ricco Zhang, Senior Director Asia Pacific ICMA and Janqing Jia, Associate Director of ICMA to discuss the changing landscape of ESG in China over an informal breakfast in Central.

As many of you know, ESG standards and regulations have come under increasing scrutiny over the last few years, from consumers to investors to companies, and they can carry serious risks if ignored.

One of the first points that Yanqing made was that China is slowly adopting more stringent and global standards for its economy. Although China was one of the largest Green Bond issuers in recent years, that was due to a differing qualification to most global standards.

Only some 40 to 50% of Green Bonds issued in China are estimated to qualify under global standards, such as the Climate Bonds Initiative or IFC standards.??

However, China is coming around to using more internationally recognized standards over the upcoming years.

The second interesting point is the switch to a more centralized standard across the board. This is because, in the past, different provinces had different standards when issuing Green Bonds.

As Yinqing explained, this clarification will have a major impact on the issuance of offshore green financial instruments in the international markets – to put it simply, international investors will feel more reassured if an issuance is regulated under one umbrella.

The third point that both Yanqing and Ricco were keen to examine is the whole standards issue for global green financial instruments and how it has developed over the last two decades. Organisations such as the Global Reporting Initiative (GRI) have been in existence since 1997, but only in the last 10 years or so has it become an element of standard reporting for companies across the board.

The final point Yanqing pointed out was that this constant evolution will continue, as regulators and investors demand information and data on a company’s ESG credentials. Companies that fail to embrace ESG as a valuable element in their management strategy going forward will likely fall behind in terms of investment and revenues.

Once again, many thanks to Ricco and Yanqing for their insights at a time when ESG is becoming more and more important, but also more and more complicated!