Promoting green recovery by championing the power of disclosure, transparency and UK-China collaboration

Green finance is central to China’s attempts to green its economy and the recovery from COVID-19. The scale of capital required is huge if China is to meet its energy and climate goals, and the role of finance in combating climate change was elevated with the People’s Bank of China being included in the National Leading Group of Combating Climate Change and Energy Saving in 2018 and the establishment of the National Climate Investment and Finance Committee. Although remarkable progress has been achieved in development of green finance in China, there remain constraints among which transparency is key. Chinese policy makers and regulators are working on mandatory environmental disclosure regulations, and some local governments have already advanced their green finance agenda with more ambitious disclosure requirements; and voluntary disclosure plays an important complementary role in advancing transparency. UK-China green finance cooperation has always highlighted the role of disclosure and conducted a pilot program for FIs to disclose in line with TCFD. With deepening reform of the Chinese capital market, it will become more open to international investors, the advanced ESG investment strategy will drive for more transparent and consistent disclosure. These developments need to be supported by enhanced disclosure capacity and harmonised disclosure standards and need to be addressed urgently for lasting impact. Project approach Aim: To create an enabling environment for change supporting government, investors and FIs to shift capital at scale and thereby furthering China’s green finance agenda and NDC ambitions. The project will incentivise China’s transition to a more sustainable growth model in line with the Paris Agreement (PA) goals and the SDGs (notably targets 8.4 and 12.6). It will accelerate the work undertaken by CDP supported by the first phase of UK PACT financing, and build on CDP’s strategic global work to develop transition pathway methodologies and scoring for the financial sector, generating insights on actors who influence capital flows globally. The project will link pivotal target/beneficiary groups: (i) regulatory authorities (ii) financial institutions and/or investor (iii) investee companies. It will build capacity of these beneficiaries and network these players with international counterparts for exchange and learning. Outcomes, respective outputs and key activities Outcome 1: Enhanced policy environment conducive to corporate environmental disclosure. 1. Knowledge products to enhance understanding of key policy makers on environmental disclosure • Comparative analysis of updated environmental disclosure policies internationally. • Demand-driven knowledge products to MEE and CSRC, as well as local governments (Shenzhen, Shanghai, and Beijing) to strengthen environment disclosure policies/regulations/guidance. 2. Enhanced network of policy makers at national and subnational levels • Engagement and facilitated dialogue with policy makers from national and local governments (Shenzhen, Shanghai, and Beijing) to exchange research learnings and insights and at COP26. Outcome 2: Leading FIs (banks, investors and insurers) emboldened as champions/ drivers of climate and environmental disclosure 3. Knowledge products/ tools and technical support supporting Chinese FIs to materialise their climate impact with consistent, forward looking reporting. • Build capacity of targeted FIs to respond to CDP Financial Services Sector Questionnaire and increase disclosure • Modelled GHG emissions data of CSI 300 index companies • Anthology of best practices to measure the climate risks and facilitate ESG investment Outcome 3: Enhanced knowledge and capacity of Chinese companies and FIs to assess, disclose and address climate-related risk in line with TCFD and international standards. 4. UK-China network to enhance capacity of Chinese companies on climate disclosure and dialogue in high emitting sectors. • Chinese-UK Pilot group of companies in environmental high impact sectors to leverage learning and grow international dialogue towards quality disclosure aligned to TCFD and international standards • Dedicated technical support and feedback to pilot companies and gap analysis of disclosure. • Showcased work through Chinese and UK outlets. 5. Skills/capacity enhanced of 300 listed Chinese companies towards improving quality and quantity of TCFD-aligned disclosure • Assessment and dissemination of readiness of Chinese listed companies and FIs for TCFD-aligned disclosure • Collaborative online/onsite workshops (x 3) with GFDC in Beijing, Shanghai and Shenzhen to build skills of 300 stakeholders on disclosure and national/Shenzhen green finance policies. • Engagement with 300 listed companies from high emission impact sectors to achieve increase and quality of disclosure 6. Knowledge product: Dedicated page in TCFD Knowledge Hub housing technical documents and guidance in Chinese