Insights

Globally, pension funds have been increasingly influential on their invested companies’ governance structure and behavior by placing strict requirements on their governance parameters. For example, pensions in North America, Europe and North Asia, typically formulate detailed proxy voting policies, with the vast majority actively exercising their voting rights in order to ensure long-term value.

Corporate governance is the key element of ESG. A good governance system should not only be able to alleviate the traditional agency cost problem, but also effectively standardize the company's conduct in environmental protection and social responsibility, thus systematically control the three factors of E, S and G.

As a next step of developing ESG information disclosure system, China will mandate environmental information disclosure for all A shares by 2020. At present, Chinese government is paying close attention to environmental protection, thus the environmental supervision on listed companies has reached an unprecedented level.

We know all too well that global responsible investing requires an ever-increasing demand for substantive and proven ESG data. However, in China due to the historical lack of regulatory guidelines, most existing ESG data on listed companies has until now been a voluntarily disclosure and thus PRC issuers have been inclined to only provide information that favors to their own interests.

China's securities market is accelerating the introduction of ESG investment due to the great pressure of regulatory initiatives and foreign capital inflows. After recognizing the serious negative impact of short-term speculation, PRC regulators are committed to building a rational value investment culture.