China’s Ministry of Finance, alongside several other of the country’s ministries, central bank, and regulators, announced the release of its new “Corporate Sustainable Disclosure Standard No. 1 – Climate (Trial),” a new standard, aligned with the IFRS Foundation’s climate reporting standard, aimed at enabling companies to report on climate-related risks, opportunities and impacts, and to support China’s green development goals.
While the new standard is being positioned by the Ministry of Finance as a trial document, and applied initially as voluntary, the ministry said that it will expand its application over time to more companies and eventually to the implementation of mandatory climate-related disclosures.
According to the ministry, the new trial climate reporting standard forms part of China’s efforts to addressing climate change and accelerating its comprehensive green economic and social development transformation, by providing a key mechanism to enable green and low-carbon development, as well as to solve greenwashing problems through the standardization of information disclosure, and support the guidance of capital flows to low-carbon projects.
The ministry added that the guidelines will “establish a transparent, comparable, and reliable climate information disclosure system, strengthen the supply of standards to support green and low-carbon development, help guide market expectations, regulate corporate behavior, and scientifically assess the progress of transformation, and provide key policy tools and institutional infrastructure for transforming the “dual carbon” target from a national macro strategy to corporate micro actions.”
In addition to supporting China’s green development, the ministry also noted the need for deep alignment with international rules, with the new standard designed to “structurally converge” with the IFRS Foundation’s International Sustainability Standards Board’s (ISSB) sustainability reporting standards, but with some China-specific adaptations.
Most notably, the new Chinese standard follows the main structure of the IFRS S2 climate reporting standard, incorporating key pillars including Governance, Strategy, Risk and Opportunity Management, and Metrics and Targets.
Among the key changes from the IFRS standard is the inclusion in the Chinese standard of reporting on climate-related impact information, or the impact of business activities, including value chain activities, on climate change, or potential foreseeable impacts.
While the initial standard released by the ministry includes guidelines around common requirements for climate-related information disclosure across various industries, the ministry stated that development has started on application guidelines for industries such as power, steel, coal, petroleum, fertilizer, aluminum, hydrogen, cement, and automobiles, which will be released over time to provide “a full-chain industry application system of ‘basic guidelines + specific guidelines + industry application guidelines.’”
The ministry added that the new standard will at first be voluntary for enterprises, before the scope and requirements for implementation are specified, while it will prioritize key areas, and expand implementation “from listed companies to non-listed companies, from large enterprises to SMEs, from qualitative requirements to quantitative requirements, and from voluntary disclosure to mandatory disclosure.”
