Recommendations
The China report sets out recommendations in five areas:
- Publishing guidance on green and sustainable investment that articulates how institutional investors and their investment managers should implement the Guidelines for Establishing a Green Financial System (GEGFS);
- Introducing regulation for pension funds to integrate ESG issues, encourage high standards in investee companies and disclose on ESG practices and performance;
- Ensuring and monitoring the effectiveness of the mandatory environmental disclosure framework for companies, and aligning with international disclosure standards for ESG issues;
- Expanding a standardised offering of green and sustainable investment products and comprehensive tools to support their market uptake; and
- Supporting investor education and ESG investment research.
Project Background
The rise of green finance in China
The G20 Summit in Hangzhou in 2016 identified green finance as a key driver of global growth and sustainable development. Since then, China has set up an ambitious agenda to develop green finance and transform its growth model towards a greener economy.
The Guidelines for Establishing a Green Financial System. jointly issued by seven state ministries including People’s Bank of China’s, helped place China as the largest market for green bonds worldwide. At a regional level, China has launched the Belt and Road Initiative, with the aim of contributing to balanced, inclusive and sustainable regional development through financing large-scale infrastructure projects in China, Asia and East Africa.
China is now the world’s largest holder of foreign exchange reserves, second-largest economy and second-largest destination for foreign direct investment. China’s ongoing work to promote green growth and green finance strategies is therefore key not only to international efforts to halt climate change but also to the global goals of balanced, inclusive and sustainable development.
The Guidelines for Establishing a Green Financial System. jointly issued by seven state ministries including People’s Bank of China’s, helped place China as the largest market for green bonds worldwide. At a regional level, China has launched the Belt and Road Initiative, with the aim of contributing to balanced, inclusive and sustainable regional development through financing large-scale infrastructure projects in China, Asia and East Africa.
China is now the world’s largest holder of foreign exchange reserves, second-largest economy and second-largest destination for foreign direct investment. China’s ongoing work to promote green growth and green finance strategies is therefore key not only to international efforts to halt climate change but also to the global goals of balanced, inclusive and sustainable development.
A new research project on investor obligations and duties and ESG integration
Creating an enabling environment to attract the required investment and execute China’s long term strategies implies that regulatory frameworks match policy ambitions. The work of UNEP FI, the PRI and The Generation Foundation on Fiduciary Duty in the 21st Century addresses a major aspect of this challenge: embedding material environmental, social and governance (ESG) factors – specifically those enabling a greener economy – in investor obligations and duties, also referred to in common law markets as investor fiduciary duty.
Building on the recent progress of the national Green Finance initiative, and on the findings of our work on investor obligations and duties, the aim of this new research project is to support national stakeholders in further developing an investment and regulatory environment that promotes consideration of financially material ESG issues in China, consistent with investor obligations and duties[1].
The project’s goals are to:
[1] ESG integration is defined as the systematic and explicit inclusion of material ESG factors into investment analysis and investment decisions. For detailed discussion of investor obligations and duties, see the Investor Obligations and Duties in Six Asian Markets report.
Building on the recent progress of the national Green Finance initiative, and on the findings of our work on investor obligations and duties, the aim of this new research project is to support national stakeholders in further developing an investment and regulatory environment that promotes consideration of financially material ESG issues in China, consistent with investor obligations and duties[1].
The project’s goals are to:
- support national policy development by making available an international evidence base on investor obligations and duties, and ESG integration;
- help investors understand their obligations and duties and promote market adoption of regulations that encourage green finance;
- provide recommendations on options that policymakers and investors could consider to improve risk management and strengthen sustainable capital market development.
[1] ESG integration is defined as the systematic and explicit inclusion of material ESG factors into investment analysis and investment decisions. For detailed discussion of investor obligations and duties, see the Investor Obligations and Duties in Six Asian Markets report.