Chinese exchanges endorse double materiality in market-first disclosure rules

The proposals give the option of voluntary compliance for smaller firms.

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Large listed Chinese companies will be required to disclose a myriad of ESG-related information, including carbon emissions and their impact on stakeholders, for the first time.

Three sets of proposed disclosure rules were released on Thursday by China’s main stock exchanges: the Shanghai Stock Exchange (SSE), the Shenzhen Stock Exchange (SZSE) and the Beijing Stock Exchange (BSE). The announcement came just before the start of Lunar New Year celebrations.

The strictest requirements will apply to the top 180 SSE-listed companies (SSE 180), the top 50 companies on SSE’s science and tech board (STAR 50), the top 100 SZSE-listed companies (SZSE 100) and the top 100 companies listed on SZSE’s tech-focused ChiNext market.

Key climate information identified for disclosure includes Scope 1, 2 and 3 greenhouse gas emissions, use of carbon offsets, green transition plans, internal systems and processes in place to manage climate risk and decarbonisation targets.

Companies face additional qualitative requirements to “fully identify and evaluate” how their operations impact broader society and the environment, and their contributions to the UN Sustainable Development Goals, as well as to assess how ESG issues might impact their own operations and profits in the following year.

Reporting entities are encouraged to carry out climate scenario analysis as a way to gauge their resilience to climate risks and to take out third-party verification on reported data.

The draft rules did not explicitly reference the International Sustainability Standards Board (ISSB) global disclosure framework, which the Chinese government has not yet publicly committed to implement despite hosting the standards setter’s Beijing office, but noted that disclosures should be made by referencing measurements and methods recognised by international or domestic standards.

However, the use of double materiality could raise questions over whether China may be considering aligning itself closer to the EU’s approach to ESG disclosures, as opposed to the ISSB’s strict focus on enterprise value.

China’s ministry of finance previously questioned ISSB’s positioning as a “global baseline”, after raising concerns that it had not “fully considered the differences in economic development levels of different countries and in sustainability disclosure regulatory capabilities”.

Companies that are unable to fulfil the requirements due to “state and commercial secrets” will need to explain any omissions.

Disclosures are to be made from 2026, based on 2025 information, together with annual company reports.

Beijing-listed companies and the remaining listed companies in Shenzhen and Shanghai can choose to comply with the rules voluntarily.

The exchanges are soliciting public feedback on the rules until 29 February.

The BSE was launched two years ago to support smaller, innovative companies, and had a reported combined market cap of 366 billion yuan ($50 billion; €47 billion) compared to SSE’s 47 trillion yuan as of November.

The announcement comes two years after the China Securities Regulatory Commission said that it would begin developing new reporting standards on the topic. Insurance giant Ping An released China’s first voluntary ESG disclosure frameworks for corporates in 2022, and for insurers in 2023.