{"id":60042680,"date":"2024-07-18T18:25:23","date_gmt":"2024-07-18T17:25:23","guid":{"rendered":"https:\/\/dialogue.earth\/?p=60042680"},"modified":"2024-09-02T16:22:30","modified_gmt":"2024-09-02T15:22:30","slug":"how-chinese-climate-disclosures-can-drive-emission-cuts","status":"publish","type":"post","link":"https:\/\/dialogue.earth\/en\/climate\/how-chinese-climate-disclosures-can-drive-emission-cuts\/","title":{"rendered":"How Chinese climate disclosures can drive emission cuts"},"content":{"rendered":"\n

This year has already been a big one for sustainability disclosures in China.<\/p>\n\n\n\n

On 1 May, new guidelines came into effect for firms listed on any of mainland China\u2019s big three stock exchanges in Beijing, Shanghai and Shenzhen. What this means is that many more Chinese companies will have to publish 2025 sustainability reports by April 2026. To be precise, 457 companies will need to, and they were responsible for two-thirds of national emissions in 2023.<\/p>\n\n\n\n

The guidelines list 21 topics<\/a> to cover under the categories environment, society and governance (ESG). The first topic is \u201cresponding to climate change\u201d. Guo Peiyuan, chair of SynTao Green Finance, tells Dialogue Earth that this position reflects the importance of climate change in sustainability disclosures and is similar to approaches taken overseas.<\/p>\n\n\n\n

Sustainability disclosures vs climate disclosures<\/span>
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Companies around the world are increasingly considering the impacts of climate change on their future operations and disclosing their own environmental and social impacts.<\/p>\n\n\n\n

One of the most consequential disclosure bodies is the International Sustainability Standards Board (ISSB), which has a disclosure framework for sustainability (IFRS S1), and another dedicated to climate change (IFRS S2).<\/p>\n\n\n\n

Both of these evolved from a disclosure framework by the since-disbanded Task Force on Climate-Related Financial Disclosures (TCFD).<\/p>\n\n\n\n

The ISSB focuses on the same four pillars used by the TCFD: governance, strategy, risk management, and metrics and targets.<\/p>\n\n\n\n

Contemporary sustainability frameworks usually include climate requirements, along with other ESG topics. But climate-specific frameworks remain in use in many jurisdictions. For example, the US Securities and Exchange Commission\u2019s Final Climate Disclosure Rules.<\/p>\n<\/div><\/div><\/div>\n\n\n\n

China accounts for a third of the world\u2019s greenhouse gas emissions. Much of its emissions arise from manufacturing for export, and those firms have always been a focus for emissions-reduction efforts. The firms that will be mandated to make disclosures under the guidelines produced an estimated 8.5 billion tonnes of CO2 in 2023 (67.5% of China\u2019s total), according to Bloomberg Terminal data analysed by Dialogue Earth.<\/p>\n\n\n\n

This means moves by Chinese regulators could have a greater impact than similar actions by regulators elsewhere.<\/p>\n\n\n\n

Mandatory disclosures<\/h2>\n\n\n\n

As mentioned, the first batch of 457 firms to be covered by the guidelines must make disclosures by 2026. This includes companies listed on Shanghai\u2019s 180 or Star 50 stock exchange indices, Shenzhen\u2019s 100 and ChiNext indices, and any firm listed simultaneously in mainland China and elsewhere.<\/p>\n\n\n\n

These companies are usually bigger firms that play leading roles in their sectors. And despite accounting for less than a tenth of all A-listed firms \u2013 meaning those that trade in Chinese yuan on Chinese stock exchanges such as Shenzhen\u2019s and Shanghai\u2019s \u2013 they represent more than half of their total value.<\/p>\n\n\n\n

In terms of sectors, IT and industrial firms are well-represented, followed by \u201cmaterials\u201d, healthcare and finance. (The materials sector includes chemicals, construction materials, glass, metals, and mining.) Though only 14 energy firms are covered, their scope 1, 2 and 3 emissions total 4.91 billion tonnes, which is more than half of the 457 companies\u2019 total emissions.<\/p>\n\n\n\n

What are scope 1, 2 and 3 emissions?<\/span>
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Scope 1 <\/strong>refers to an organisation\u2019s direct emissions from its operations. For example, leaks of methane from oil extraction.

Scope 2 <\/strong>covers indirect emissions from an organisation\u2019s energy use, such as from a power plant supplying a paper mill with electricity and heating.

Scope 3<\/strong> are indirect emissions that occur along the value chain of an organisation and are not owned or controlled by it. These can include the manufacture and transportation of products. This scope usually represents the largest share of an organisation\u2019s emissions.<\/p>\n<\/div><\/div><\/div>\n\n\n\n

The guidelines follow the ISSB standard closely, requiring companies to disclose climate governance, strategy, risks and opportunities, and indices and targets. They must reveal their scope 1 and 2 emissions and are encouraged to disclose scope 3 emissions. Firms using carbon credits or carbon trading must also make associated disclosures. And all companies have to reveal their energy transition plans, measures taken in response to climate risks and opportunities, and their progress on those.<\/p>\n\n\n\n

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