The ISSB Sustainability Disclosure Standards are about to come into effect, and ESG disclosure must bid farewell to the "fragmented" storytelling approach
In June this year, the International Sustainability Standards Board (ISSB) released the official version of the international sustainability disclosure standards IFRS S1 and S2 (hereinafter referred to as the "ISSB Standards"), which set out requirements for sustainability-related financial information disclosure and climate-related disclosure. The guidelines will come into force in January 2024.
At present, the disclosure of ESG information by A-share listed companies is still voluntary, but the Hong Kong Stock Exchange has previously announced that it will align with the ISSB standard, which also means that companies listed on both A-shares and Hong Kong stocks will be affected.
There are only two months left before the ISSB guidelines come into forceWhat are the current pain points of Chinese enterprises in ESG information disclosure, and will they be in line with ISSB standards in the future? At the recent "2023 Greater Bay Area Sustainable Finance Forum" hosted by the Shenzhen Local Financial Supervision and Administration Bureau and co-organized by the Social Value Investment Alliance, some institutions and scholars also discussed issues related to the current ESG information disclosure standards.
The number of disclosures has increased, but quality issues remain
According to the "Sustainable Development Value Assessment Report of A-share Listed Companies - 2023 Discovery of China's "Yili 99" released by the Social Value Investment Alliance at the above-mentioned forum, the latest overall score of the top 99 listed companies (hereinafter referred to as "Yili 99") is 68.9 points, which is higher than last year, with the 3A sustainable development value evaluation model of listed companies as a tool, the CSI 300 constituent stocks as the object, and the comprehensive contribution to society, economy and environment as the content. The agency pointed out that judging from this data, China's sustainable development is moving forward steadily.
The White Paper on ESG Value Discovery of Listed Companies Controlled by Central Enterprises jointly released by Harvest Fund and Guoxin Consulting also shows that as of the end of June 2023, 34.4% of A-share listed companies have disclosed independent ESG or social responsibility reports, of which the ESG report disclosure rate of central enterprises is as high as 78.3%.
However, it is worth noting that while the proportion of information disclosure of A-share listed companies is growing steadily and the sustainable development is moving forward, many industry insiders believe that problems such as the low quality of corporate ESG information disclosure and the weak willingness to disclose still exist.
Bai Hong, founding secretary general of the Social Value Investment Alliance and CEO of Menglang Sustainable Digital Technology, pointed out that in the data of "Yili 99" for about 9 years, the highest rating of listed companies is two A, which still does not exceed two A+.
Among them, the company still faces layers of challenges in carbon emission information. Bai Hong introduced that among the "Yili 99", 41 companies have clearly set carbon targets, only 10 have clarified the time for carbon peaking, and 21 have clarified the time for carbon neutrality. "The biggest challenge in implementing the ISSB is calculating Scope 3 (i.e. the upstream and downstream value chains) of the company. Only 22 companies (on the list) disclosed Scope 3 emissions, accounting for 22.22% of the disclosure. She noted.
Cheng Lin, director of the International Cooperation Research Center of the Beijing Institute of Green Finance and Sustainable Development, believes thatFrom the perspective of disclosure data, in addition to the lack of carbon information, the problem also includes the inconsistency of information disclosure is not high, and the comparability is also very poor。 According to the survey, there are usually several reasons for the poor quality of ESG information disclosed by enterprises. The first is that the company has information, but chooses not to disclose it because it involves corresponding secrets or there are no relevant regulations in the country; The second is when the company has no data or the data is incomplete and cannot be disclosed. Some companies only have one or two years of data in their hands, which cannot be cross-checked for many years, or just unverified data.
The disclosure requirements have shifted from "free body" to "structure".
Behind many pain points,The industry has called on Chinese companies to switch from qualitative to quantitative when disclosing sustainability information, and change the way "free body" reports。
Zhang Zhengwei, Special Advisor to the President of the International Sustainability Standards Board and Director of the Beijing Office, believes that there is a need for a unified disclosure standard in the field of sustainability, which is why the international community supports the establishment of the ISSB. The unified guidelines mainly solve the problem of comparability, and without comparability there is no decision-making, and the ISSB set of guidelines is to draw a baseline.
"The previous disclosure requirements can be understood as 'free bodies', one of the characteristics of which is that there are more good things to say and bad things to say less. The ISSB guidelines now require a 'structure', and some of the questions under the structure must be answered. Zhang Zhengwei believes that the structure is mainly to ensure that the information is comparable, and investors can make decisions on this basis.
Zhang Zhengwei further explained,Domestic companies are accustomed to telling stories in a "fragmented" wayFor example, if a factory reports the carbon reduction of a certain equipment this time, it will start to tell another story next time, forming a "line-segment" disclosure.But sustainability reporting requires a "curve" of the company as a whole。 For example, in terms of carbon emission reduction, what is the goal of the enterprise, how many years will it take to reach the peak of carbon emissions, how many goals will be achieved each year, and how to set the annual goals, which will be compared every year in the future.
Shi Han, director of the ESG Center of the China Business Centre at the University of Hong Kong, believes that companies need to shift from CSR reporting (social responsibility reporting) to ESG reporting. At present, there is a big difference between CSR report and ESG report. CSR reporting will not actually enter the core business strategy of enterprises, but ESG reporting needs to reshape the business model of enterprises and promote sustainable development of enterprises.
More importantly, CSR reporting is more qualitative and not legally driven. The ESG report is a quantitative report, which is more driven by the government and stock exchanges.
There is a need to shift from qualitative to quantitative disclosure。 Zhao Yonggang, general manager of the ESG business department of China Securities Index, pointed out that at present, domestic companies disclose more qualitative information and less quantitative information, which makes it difficult for intermediaries to extract core data in tens of thousands of word reports. At present, the quality of information can only be improved through third-party certification data, data evaluated by government agencies, self-developed data, machine learning, etc., but fundamentally enterprises need to disclose ESG-related information.
Zhao Yonggang suggested that in order to change the current situation of lack of quantitative data, it is fundamentally necessary to promote enterprises to disclose ESG-related information. Therefore, it is necessary to refer to the sustainable information disclosure standards based on international consensus, and comprehensively consider China's national conditions, and promote relevant policies and systems that are in line with China's current situation.
"It is now widely accepted that it is not possible for companies to engage in ESG disclosure or implement sustainable business through voluntary action." Shi Han believes that the government plays a key role in guiding companies to make ESG disclosures, and the experience of various countries shows that relying on companies to voluntarily do ESG work is less effective. If you want to do a good job in sustainable finance or green finance, the first prerequisite is that the company has a standardized ESG standard to follow. If you want to strengthen the requirements for ESG performance information of companies, you need to make mandatory disclosure of ESG information of listed companies.
(Assistant journalist Chen Yue also contributed to this article)
