SSE Releases Sustainability Reporting Guidance to Drive High-quality ESG reporting by Listed Companies

Shanghai Stock Exchange (SSE), under the oversight of China Securities Regulatory Commission (CSRC), has recently released Guide No.4 for Self-Regulatory Supervision on Listed Companies of the SSE — Compilation of Sustainable Development Reports and Guide No.13 for Self-Regulatory Supervision on Listed Companies of the SSE STAR Market— Compilation of Sustainable Development Reports (hereinafter referred to as the Guidance). The two documents are a supplement to the previous release of Guidelines No. 14 of Shanghai Stock Exchange for Self-Regulation of Listed Companies—Sustainability Report (Trial) (hereinafter referred to as Guidelines No.14), aiming to facilitate understanding and application of Guidelines No.14, and improve ESG reporting quality by listed companies.

The SSE has been earnestly implementing the new development concepts in recent years to spur comprehensive socio-economic green transition and deliver growth in technology finance, green finance, inclusive finance, pension finance and digital finance. The SSE has taken a series of measures, including the formulation of Three-Year Action Plan on Improving ESG Information Disclosure Quality of Listed Companies on the SSE (2024-2026), to improve listed companies’ ESG disclosure quality. In terms of information disclosure, 1,193 SSE-listed companies issued ESG reports, sustainability reports or social responsibility reports in 2024 for the fiscal year of 2023, covering 52% of SSE-listed companies and marking a uptick of 6 percentage points year-on-year, which sets a new record both in absolute terms and by percentage. In terms of ratings, as of the end of 2024, 342 SSE-listed companies were covered by MSCI ESG ratings. Among them, 100 companies received an upgrade in the latest rating and 8 companies were rated AAA, reaching a world-leading level. In terms of investment, by the end of 2024, China Securities Index Company released a total of 147 ESG and other sustainability indexes, including a growing number of broad-based ESG indexes building on SSE 50 Index, SSE 180 Index, CSI 300 Index, etc. The number of products tracking ESG and other sustainability indexes reached 89, and the number of green ETFs reached 45, with the total AUM exceeding 130 billion yuan.

Following the release of the Guidance, the SSE ESG disclosure system—governed by Rules Governing the Listing of Stocks on Shanghai Stock Exchange and Guidelines No. 14, and supplemented by the Guidance—is taking shape. The first two attachments are launched along with the Guidance, namely No.1: General Requirements and Disclosure Framework and No.2: Response to Climate Change, aiming to help listed companies develop sustainability governance framework and management procedures, and provide a tool kit and encyclopedia to enhance the quality of ESG reporting. First is offering sample disclosures. Specific working methods, disclosure focuses and sample texts are available in the Guidance to help listed companies figure out the paths towards building a governance structure and management system compatible with sustainability requirements. They are also useful in identifying material topics and making specific disclosure. For example, No.2: Response to Climate Change not only outlines carbon emission calculation methods and scenario analysis procedures, but also summarizes 22 disclosure focuses to help listed companies locate key items around climate change topic. Second is enriching interpretation of standards. Considering the broad coverage and professional nature of ESG reports, the Guidance help listed companies better understand relevant rules by elaborating technical concepts, standards and requirements. For example, detailed descriptions can be found around climate-related physical risks and transition risks, climate-related financial impacts and transition plans, and the scope of greenhouse gas emissions. Third is adhering to the voluntary nature of the Guidance. While providing advice, the Guidance documents do not require additional mandatory disclosure. Listed companies may follow the advice in the Guidance as they see fit. The SSE encourages listed companies to prepare reports based on sample texts and disclosure focuses from the Guidance.

Going forward, under the oversight of the CSRC, the SSE will draft guidance on other important topics based on market needs. The SSE will continue to collect best practice of listed companies, strengthen dynamic assessments, and enhance the adaptability, effectiveness, and operability of rules, so as to help listed companies disclose higher-quality ESG reports.