News & Events

• IFRS Foundation issues guidelines on regulatory digital taxonomy
• Central Committee of the Communist Party of China and the State Council issue opinions for the first time to accelerate comprehensive green transformation of economic and social development
• European Commission releases FAQs on CSRD to assist companies in implementing new sustainable development reporting rules
• UK to introduce legal regulation of ESG rating providers
• SEC defends its climate disclosure rules in court

• • • • During this reporting period (August 1st to August 15th), a total of 412 ESG risk events occurred in 224 A-share listed companies. Among them, there were 8 environmental dimension risk events, 53 social dimension risk events, and 351 corporate governance dimension risk events.
      • As of August 15th, 2024, a total of 12,002 ESG risk events have occurred in 1,772 A-share listed companies for the year. This includes 140 environmental dimension risk events, 3,359 social dimension risk events, and 8,503 corporate governance dimension risk events.

The information contained in the document is obtained by Zhongchengxin Green Gold from sources it deems reliable and accurate. However, due to potential human or mechanical errors and other factors, the above information is provided as is at the time of publication. Zhongchengxin Green Gold makes no express or implied representations or warranties regarding its accuracy, timeliness, completeness, feasibility, or suitability for any commercial purpose.

1) International Organizations

IFRS Foundation Releases Regulatory Digital Taxonomy Guide

The International Financial Reporting Standards Foundation (IFRS Foundation) has issued a guide to support regulatory authorities in implementing the International Financial Reporting Standards digital taxonomy.

The International Financial Reporting Standards digital taxonomy is intended for use in digital filing systems that require the submission of general financial reports in a computer-readable, structured data format such as eXtensible Business Reporting Language (XBRL) or Inline XBRL (iXBRL).

The taxonomy can be implemented in various ways within digital filing systems. To fully leverage the benefits of digital financial reporting, regulatory authorities should implement the International Financial Reporting Standards digital taxonomy in a manner that supports cross-border digital comparability and facilitates the analysis of reported information.

Information that meets the requirements of the International Financial Reporting Standards (IFRS) but is not properly tagged, lacks granularity in tagging, uses elements from local classification systems for tagging, or uses elements from the IFRS digital taxonomy no longer associated with the applicable IFRS namespace can complicate digital comparisons, be time-consuming, and hinder cross-border digital comparability. This could potentially reduce foreign investment and increase capital costs for companies.

This guide aims to assist regulatory authorities and digital filing system owners in implementing the IFRS digital taxonomy to support cross-border digital comparability and facilitate the analysis of information prepared in accordance with the International Financial Reporting Standards (IFRS) standards.

(Source: Corporate Disclosures)

Commentary: Digital financial reporting enables investors and other users to efficiently search, extract, and compare companies' financial disclosures related to accounting and sustainability. This guide can enhance transparency and efficiency in capital markets, helping companies raise funds at lower costs.

2) Asia-Pacific Region

Central Committee of the Communist Party of China and the State Council issue opinions for the first time to systematically deploy and accelerate comprehensive green transformation of economic and social development

On August 11, the "Opinions on Accelerating the Comprehensive Green Transformation of Economic and Social Development" issued by the Central Committee of the Communist Party of China and the State Council were released. This marks the first systematic deployment at the central level to accelerate the comprehensive green transformation of economic and social development.

The opinions set forth a series of goals: by 2030, the scale of energy conservation and environmental protection industry will reach around 15 trillion yuan; the proportion of non-fossil energy consumption will increase to about 25%; the carbon emission intensity of turnover of operational transport units will decrease by approximately 9.5% compared to 2020; and the annual utilization of bulk solid waste will reach around 45 billion tons, among others. 

The opinions focus on five major areas including building a spatial pattern for green, low-carbon, and high-quality development, accelerating the green and low-carbon transformation of industrial structure, steadily promoting the green and low-carbon transformation of energy, advancing the green transformation of transportation, and promoting the green transformation of urban and rural development. They also cover three key aspects such as implementing a comprehensive resource-saving strategy, promoting the green transformation of consumption patterns, and leveraging technological innovation support, deploying to accelerate the formation of a spatial pattern, industrial structure, production methods, and lifestyles that save resources and protect the environment.

Commentary: Accelerating the green and low-carbon transformation of economic and social development, especially targeting traditional high-pollution and high-energy-consuming industries. This signifies that future economic development will place more emphasis on environmental protection and the application of low-carbon technologies, prompting companies to reduce their negative impact on the environment while improving economic efficiency.

3) European Region

European Commission releases CSRD FAQ to help companies implement new sustainable development reporting rules

On August 7, the European Commission released a new set of Frequently Asked Questions (FAQ) aimed at supporting companies and other stakeholders (such as auditors) in implementing the reporting requirements of the European Union's Corporate Sustainability Reporting Directive (CSRD).

According to the Commission, the new FAQ manual reflects feedback from companies and aims to help reduce the administrative burden on companies, provide greater clarity and certainty. Its goal is to "promote stakeholder compliance with regulatory requirements in a cost-effective manner and ensure the availability and comparability of sustainability information in reporting."

The main topics covered in the FAQ manual include the scope of the rules, confirmation of company size categories for compliance dates, exemptions, which ESRS to use, factors to consider when using estimates when companies are unable to obtain value chain information, and sustainable development information requests that small and medium-sized enterprises should receive as part of sustainable development strategy research. The FAQ manual also addresses audit and certification-related issues, such as auditor approval and training requirements, and certification requirements for independent assurance providers.

(Source: ESGToday) 

Commentary: Based on the new European Sustainability Reporting Standard (ESRS), the CSRD introduces more detailed reporting requirements on companies regarding the impact of environmental, human rights, and social standards as well as sustainable development-related risks. The FAQ document released by the European Commission provides valuable guidance for companies, helping to facilitate the smooth implementation of CSRD across the entire European Union.

The UK to introduce legislation to regulate ESG rating providers

According to a speech by UK Chancellor Rachel Reeves on August 7, the UK government will introduce legislation in 2025 aimed at regulating ESG rating providers. This was also confirmed by a statement from the UK Treasury. The statement said, "The Chancellor sees an opportunity to work with the industry to drive more investment and strengthen the UK's leading position in sustainable finance, starting with addressing the lack of transparency behind ESG ratings."

According to media reports, the new legislation will place ESG rating providers under the oversight of the Financial Conduct Authority (FCA).

This move comes as pressure increases to regulate ESG rating providers, as investors have increasingly integrated ESG considerations into their investment processes in recent years, and market and securities regulators typically do not cover the activities and operations of providers, leading to rapidly growing demand.

Since IOSCO introduced its recommendations, multiple jurisdictions have taken actions to strengthen supervision in this area, including the EU, where EU legislators recently agreed to include ESG rating providers under the oversight of the European Securities and Markets Authority (ESMA) and introduce rules to enhance the reliability and comparability of ESG ratings and prevent conflicts of interest among providers.

In the UK, earlier this year, the FCA introduced a voluntary code of conduct for ESG rating and data providers. The previous government announced consultations on regulating ESG rating providers as part of last year's updated Green Finance Strategy, aiming to establish the UK as an international green finance center.

The UK Treasury stated, "Rachel Reeves has called on the Treasury to respond quickly to industry consultations on the new regulatory regime for ESG rating providers and to introduce legislation next year."

The statement added that the regulation will aim to "promote growth, help achieve a cleaner economy, and ensure companies in critical sectors such as defense are not penalized by opaque ratings," aligning with IOSCO's recommendations.

(Source: ESGToday)

Commentary: By enhancing regulation, the government aims to enhance the credibility of ESG ratings, ensuring investors can make decisions based on more accurate and transparent information. This measure will help prevent conflicts of interest and strengthen market trust in ESG ratings.

4) North America

SEC defends its climate disclosure rules in court

The U.S. Securities and Exchange Commission (SEC) has defended its new climate disclosure rules in court, arguing that the proposed disclosures in the rules provide "information directly relevant to investment value" and that the commission has the authority to require climate risk disclosure.

In a brief filed this week with the U.S. Court of Appeals for the Eighth Circuit, the commission reiterated its position that "climate-related risks—and how public companies respond to those risks—can significantly impact a company's financial performance and condition," but current reporting on these risks is "inconsistent" and "difficult to compare," limiting investors' decision-making abilities.

SEC also addressed the argument that compliance with the new rules imposes excessive costs on companies, detailing its considerations of the economic impact of the rules, including costs and expected impacts on efficiency, competition, and capital formation. The SEC pointed out that it even revised the rules from the initial proposal in 2022 "to make the required disclosures more useful to investors and less costly."

The brief also discussed the argument that the SEC lacks the authority to require climate-related disclosures, stating that "Congress authorized the Commission to require disclosures of important information for investors' investment and voting decisions" and that "each disclosure requirement in the rules is aimed at obtaining information critical to informed investment and voting decisions."

(Source: ESGToday)

Commentary: In March 2024, the U.S. Securities and Exchange Commission (SEC) passed the final rule on climate disclosure. The SEC's requirements for companies to report greenhouse gas emissions and climate risk information have been controversial, and in April, the SEC agreed to suspend the enforcement of the new rules. The SEC is currently making efforts to establish the legality of the new rules.

During the reporting period (August 1st to August 15th), a total of 412 ESG risk events occurred among 224 A-share listed companies. Among them, there were 8 environmental dimension risk events, 53 social dimension risk events, and 351 corporate governance dimension risk events.

As of August 15, 2024, a total of 12,002 ESG risk events occurred among 1,772 A-share listed companies for the year. This includes 140 environmental dimension risk events, 3,359 social dimension risk events, and 8,503 corporate governance dimension risk events.

2) Industry Distribution of Risk Events

The risk events in this period involved 30 industries, including construction and decoration, environmental protection, machinery and equipment, real estate, computers, communication, pharmaceuticals and biotechnology, power equipment, electronics, retail and trade, basic chemicals, non-bank financials, non-ferrous metals, and media. Among them, the construction and decoration industry had the highest number of risk events, with 117 incidents occurring during the period.

3) Fine Amounts

During the reporting period, a total of 27 companies, including *ST Shentian (000023.SZ, building materials), Weiming Pharmaceutical (002581.SZ, pharmaceuticals and biotechnology), and ST Shengtun (600711.SH, non-ferrous metals), were fined a total of 19.78 million yuan. Among them, *ST Shentian (000023.SZ, building materials) had the highest fine amount of 4 million yuan.

4) ESG Risk Event Cases

Environmental Dimension Risk Event Case

On August 1, 2024, the People's Government of Jinze Town, Qingpu District, Shanghai, issued an "Administrative Penalty Decision" to Shanghai Construction Group (600170.SH, construction and decoration) for failing to prepare a construction waste disposal plan report. The Ecological Environment Bureau of Qujing City imposed a fine of 150,000 yuan on Shanghai Construction Group (600170.SH, construction and decoration) in accordance with Article 111(1) and (2) of the Law of the People's Republic of China on the Prevention and Control of Environmental Pollution by Solid Waste.

Social Dimension Risk Event Case

On August 12, 2024, the Human Resources and Social Security Bureau of Xihu District, Hangzhou City, issued an "Administrative Penalty Decision" to Hangxiao Steel Structure (600477.SH, construction and decoration) for failing to pay wages on time or withholding wages. The Human Resources and Social Security Bureau of Xihu District, Hangzhou City, imposed a fine of 18,750 yuan on Hangxiao Steel Structure (600477.SH, construction and decoration) in accordance with Article 35 of the Zhejiang Province Enterprise Wage Payment Management Measures.