China Stock Exchange releases sustainability reporting requirements

February 20th, 2024

China’s major stock markets have announced sustainability reporting guidelines to be adhered to from 2026 and to include a double materiality approach.

China’s three major stock markets, the Shanghai Stock Exchange (SSE), Shenzhen Stock Exchange (SZSE) and Beijing Stock Exchange (BSE), announced their mandatory disclosure requirements for larger cap and dual-listed issuers.

Companies will be required to report on their governance, strategy, impact, risk and opportunity management and indicators and goals for improving their sustainability.

The requirements outlined a double materiality approach, which requires companies to report on the risks and impact of sustainability issues on the enterprises’ impacts on environment and society.

Companies will need to make disclosures across a range of ESG categories, including climate change, biodiversity protection, circular economy and energy use.

The rules also include reporting on Scope 3 emissions, which are emissions not produced by the company itself but that occur as a result of actions up or down its value chain. This includes emissions generated by their supply chain and customers.

Reporting is set to begin in 2026 for the 2025 reporting period.

Disclosures on scope 3 emissions have been a controversial issue in the US. In October, California passed new legislation requiring corporations to disclose their scope 3 carbon emissions, which experts argued could provide the SEC with political cover to include scope 3 emissions in their upcoming climate disclosure rules.

The US Chamber of Commerce has filed a lawsuit against the state of California over these new corporate climate disclosure laws, arguing scope 3 emissions “can be nearly impossible for a company to accurately calculate”.