State of ESG regulation and investment outlook in China

By Ge Yin and Li Yipu, Han Kun Law Office
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With the growing importance of environmental, social and corporate governance (ESG) and the high level of globalisation in capital and supply chains, the scope of ESG regulation is no longer confined to listed companies, the traditional targets.

Additionally, an increasing number of investors are developing a keen interest in ESG and are eagerly planning their next moves, while their investment philosophy has also steadily shifted from “passive compliance” to “active empowerment”. This article analyses the ESG regulatory framework and the ESG investment environment in China, followed by a review of ESG investment trends.


ESG regulation in China is being continually explored and deepened, but no uniform or explicit regulatory standards have yet taken shape.

 ESG regulation and investment outlook China
Ge Yin
Head, Cross-border Asset
Han Kun Law Office
Tel: +86 21 6080 0966

For listed companies, the Code of Corporate Governance for Listed Companies, revised by the China Securities Regulatory Commission (CSRC) in 2018, includes a specific chapter covering the “stakeholders, environmental protection and social responsibility” of listed companies.

The Standards for the Contents and Formats of Information Disclosure by Companies Making Public Offering of Securities No. 2: Contents and Formats of Annual Reports, revised in 2021, also includes a separate section setting out requirements for disclosures relating to “environmental and social responsibility”.

These regulations have provided requirements for ESG information disclosure of listed companies, but legislatively there was much room for improvement in terms of systematic ESG information disclosure guidelines or standards.

A series of regulations and policy documents in recent years has indicated a further society-wide promotion of ESG and unlisted entities would be well advised.

For example, pursuant to the Green Finance Guidelines for the Banking and Insurance Industries, issued by the China Banking and Insurance Regulatory Commission (CBIRC) in June 2022, banking and insurance institutions are required to keep an eye on potential harm to the environment and society, and the risks that could be triggered by the construction, production and operational activities of their customers (i.e. entities seeking financing), and their principal contractors and suppliers, due to corporate governance deficiencies and management shortcomings, in addition to paying attention to their own ESG issues.

 ESG regulation and investment outlook China
Li Yipu
Han Kun Law Office
Tel: +86 10 8516 4128

In the Opinions on Further Improving the Policy Environment and Increasing Efforts to Support the Development of Private Investment, issued in October 2022, the National Development and Reform Commission (NDRC) states the necessity to improve the investment system to support green development, explore the launch of ESG assessments of investment projects and guide private investment to pay closer attention to the optimisation of environmental impacts, the bearing of social responsibility, and the improvement of governance mechanisms.

In addition to the above-mentioned general regulations, a series of ESG-related policies and regulations targeted at specific industries, or special types of companies, has been issued in China.

The People’s Bank of China, the CBIRC and the CSRC (collectively, the core financial regulators), along with the NDRC have issued policies to support the development of green finance/ESG and the offering of relevant financial products, and set out regulatory requirements for listed companies and enterprises that offer green bonds.

On this basis, securities offerings and trading venues such as stock exchanges and the National Association of Financial Market Institutional Investors have issued detailed regulations for ESG-related securities offerings and information disclosure.


The Asset Management Association of China (AMAC) and other similar industry self-regulating organisations have formulated rules overseeing ESG investment within their respective industries.

In particular, the Green Investment Guidelines (for Trial Implementation), issued by the AMAC in 2018, state that fund managers who provide fiduciary management services for domestic and overseas pension funds, insurance funds, public welfare funds and other professional institutional investors are required to play an exemplary role as responsible investors, and work proactively to establish a long-term mechanism in line with green investment or ESG investment norms.

Foreign-invested institutions have extensive experience in ESG practice, and with more sophisticated business development of foreign-invested asset management institutions in China there is a growing effort to import overseas investment experience in the ESG field into the Chinese market.

A series of foreign-invested institutions, especially private securities investment fund managers, have started to establish more professional assessment methods and systems for the green performance of investment targets such as positive assessment, negative lists, normalised risk monitoring mechanisms, emergency response development and other such relevant systems and procedures. The ESG investment of foreign-invested private securities institutions will also grow in lockstep with the development of the domestic ESG system.

In June 2018, A shares were officially included in the MSCI Emerging Markets Index and the MSCI ACWI Global Index, and all A-share companies included in MSCI indexes are subject to ESG ratings.

This move provides an important reference for foreign investors participating in Chinese securities investment through various channels – including but not limited to such cross-border channels as QFI, Shanghai/Shenzhen-Hong Kong Stock Connect and Bond Connect – spurring the opening-up of A-share companies to foreign investment and positive changes in ESG perspective.


Today, with ESG a part of the global consensus, enterprises will gradually face higher expectations and requirements from regulators, domestic and foreign investors, partners and the public with respect to their ESG practices and performance indicators.

Incorporating ESG development into an enterprise’s compliance system will help strengthen its sustainable development capabilities and competitive advantage, satisfy the intrinsic requirements of high-quality development, secure an edge in the market competition, and attract more external investment.

From the perspective of investors, overseas markets such as the EU, the US and Hong Kong have gradually developed a three-in-one ESG investment system, with ESG information disclosure as the regulatory focus, an ESG rating system as a provider of specific methodology, and both working together to provide investment guidelines.

When conducting investment evaluations of domestic enterprises, investors can refer to existing ESG investment strategies and experiences and, by taking into account the domestic ESG regulatory framework and local factors, formulate a rating system and ESG investment strategy more applicable to the domestic market so as to further stimulate the potential gains from domestic ESG and expand investment opportunities.

Ge Yin is the head of cross-border asset management practice at Han Kun Law Offices. She can be contacted by phone at +86 21 6080 0966 and by email at
Li Yipu is a partner at Han Kun Law Offices. She can be contacted by phone at +86 10 8516 4128 and by email at

Han Kun Law OfficesHan Kun Law Offices

33/F, HKRI Center Two, HKRI Taikoo Hui
288 Shimen Road (No. 1), Jing’an District
Shanghai 200041, China

Tel: +86 21 6080 0909
Fax: +86 21 6080 0999

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