Every Thursday at 9 p.m. for the past two years, about a dozen Chinese finance veterans and regulators have held a video call to talk about pushing the nation's companies to meet environmental, social and governance standards. This was supposed to be the year their efforts paid off.
ESG investing deploys more than $30 trillion worldwide, but the vast majority of Chinese companies don't report enough data to show whether they qualify for the funds. Officials have said they'll make it mandatory this year for the nearly 4,000 listed companies in the country to publish ESG metrics, potentially attracting trillions more into the country.
"After years of laying the foundations, we hope 2020 will be the year that ESG investing takes off in China," said Angela Bai, executive director of the China Alliance of Social Value Investment, which established the Thursday meetings.
But with companies struggling to overcome the economic effects of the coronavirus pandemic and a trade war with the U.S., that may be optimistic. Even before the pandemic, stock exchange officials told Bloomberg News in November that regulators had yet to give them guidelines on how companies should report ESG metrics. The Shenzhen exchange said last week it has no new information to disclose on the progress of mandatory disclosure. The Shanghai exchange did not respond to questions about the proposed changes.
The impact of the virus has taken precedence over issues such as sustainable investing, said Helena Fung, head of sustainable investment in Asia-Pacific at FTSE Russell. "Investors will be watching closely to see whether a mandatory reporting framework will be sufficiently robust to increase reporting standards," she said.
Without enforced rules, most companies don't think the benefits of being able to tap ESG funding justify the extra work. China's stock markets are dominated by retail investors who are used to wild swings and typically seek fast returns, especially from new listings. That means companies have been able to raise funds without having to publish information about sustainability.
"Many companies simply aren't aware of the benefits of disclosure and don't see why they should take on the extra cost," said Guo Peiyuan, chairman of SynTao Green Finance, a Beijing-based ESG data provider.