A recent survey has shed light on the increasing adoption of Environmental, Social, and Governance (ESG) strategies among Chinese companies.
The research was conducted by Fidelity International, an investment management services provider, and included the participation of 262 senior executives at the C-suite and director levels. The purpose of the study was to provide insights into the current and future ESG-related activities of Chinese companies.
The findings revealed a positive trend towards the development of robust ESG frameworks, greater ESG reporting, and a growing emphasis on meeting the expectations of multiple stakeholders.
Expanding ESG capabilities and reporting
According to the study, over half (53%) of respondents have publicly announced an ESG, CSR, or sustainability strategy through reports or their websites, while an additional 18% have plans to announce their strategies in the future.
ESG reporting is set to become the norm in China, with 64% of respondents currently publishing annual ESG reports, and another 29% planning to do so within the next three years. By 2026, almost all (93%) of the surveyed Chinese companies expect to have published an annual ESG report.
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Changing motivations and key drivers
The survey marks a shift in ESG motivations among Chinese companies, with a growing emphasis on meeting the expectations of various stakeholders.
While there is still progress to be made in aligning with global standards, Chinese customers and shareholders are increasingly driving the development of ESG strategies. Key drivers for ESG adoption include meeting customer expectations (47%) and investor expectations (44%). Additionally, 37% of firms identified government initiatives as a key driver.
Tina Chang, associate director, sustainable investing at Fidelity International commented , “Amongst the surveyed companies that have yet to publish ESG reports, the second most cited reason is lack of interest from investors. Interestingly, among those already publishing ESG reports, 43% also cited investor expectations as an important driver of ESG strategy, shedding light on the role investors play in promoting progress.”
Flora Wang, head of stewardship, Asia, added: “As a long-term investor in China and a firm advocate for sustainable investing, we are delighted to see ESG being embraced by more and more Chinese companies. One of the most important tools that investors can deploy to help corporates sustain momentum and achieve ESG goals is effective engagement. Compared with exclusion, engagement allows us to deliver meaningful changes for companies, track their progress and ultimately, create value for clients.”
Future outlook and challenges
Looking ahead, two-thirds of the companies surveyed plan to review focal areas for ESG within the next 12 months. Over half of these companies also intend to invest further in building tech and data capabilities to enhance efficiency in ESG data collection, which is crucial for transparency.
Data collection remains a significant obstacle to progress on ESG disclosure, as highlighted by 52% of the surveyed firms. Despite not being mandatory, Chinese companies have made significant progress in establishing special board functions, such as remuneration and nomination committees. Larger firms have shown higher levels of board independence, although their overall independence falls back to average levels.
You can find the full report here.
