"How China’s ESG Policy Is Progressing" 27 November 2022

China’s environmental, social and governance (ESG) market growth goes hand-in-hand with the development of the country’s green finance market. Hence, ESG policy cannot be discussed without considering the evolution of the country’s green finance policies.

After years of research, the People’s Bank of China (PBOC) developed the policy ideas of “three functions” and “five pillars” for green finance. The “three functions” refer to green finance’s function in resource allocation, risk management and market pricing. And the “five pillars” refer to the standards system, regulation and information disclosure, incentive constraint mechanisms, product and market system and international cooperation for the green finance business.

By following the framework set forth by the “five pillars,” this article aims to review the progress of policy development of ESG investing and green finance throughout this year and provide a glimpse into the future. The policies discussed cover the Chinese mainland, while some may also include the Hong Kong market. [...]

Going forward, despite the uncertainties entailed by epidemic prevention and control, the macro economy, the international situation and other factors, I believe that China’s green and low-carbon transformation will remain on a basically unchanged trend in the medium and long term, that China’s ESG market still enjoys considerable room for growth, and that top-down policies remain the most important force driving China’s ESG development.

I think the following policy trends are worth monitoring.

First, discussion on “Chinese-style” ESG policy. [...]

Second, concern is set to continue over the issue of greenwashing. [...]

Third, continuing policy impetus for carbon accounting in financial institutions. [...]