Mar 2023


Law Over Borders Comparative Guide:

Environmental, Social & Governance


1 . How is “ESG” in your jurisdiction defined in a corporate/commercial context, and what are its major elements?

ESG in China, despite not being officially defined in statutory laws and regulations, is comprised of three inherent elements: environmental protection, social responsibility and corporate governance. Though consideration of ESG factors existed in many forms before it garnered much attention, the practice grew in popularity among investors and legal practitioners in China when the “dual carbon” goals were recognized. In the last couple of years, the government and companies have mainly been focusing on the reduction of carbon emission when they consider ESG.


2 . What, if any, are the major laws/regulations in your jurisdiction specifically related to ESG?

In China, major laws specifically related to ESG mainly focus on environmental protection. They are: 

  • Environmental Protection Law (Amended in 2014);
  • Environmental Impact Assessment Law (Amended in 2018);
  • Law on Prevention and Control of Atmospheric Pollution (Amended in 2018);
  • Law on Soil Pollution Prevention and Control (Enacted in 2018);
  • Law on Prevention and Control of Water Pollution (Amended in 2017); and
  • Work Safety Law.

There are also other relevant regulations that touch upon ESG themes, such as regulations issued by the China Securities Regulatory Commission (CSRC) and regulatory agencies such as the stock exchanges. 


3 . What other laws/regulations in your jurisdiction touch on ESG themes?

The following laws also touch on ESG themes: 

  • Company Law; 
  • Criminal Law;
  • Labor Law; 
  • Labor Contract Law; 
  • Antitrust Law;
  • Anti-Money Laundering Law
  • Anti-Unfair Competition Law;
  • Law on the Protection of Rights and Interests of Women; and
  • Law on the Protection of Minors.

For example, the Anti-Unfair Competition Law requires business operators to assume social responsibilities. When participating in production and business activities, they must not take illegal measures, such as offering bribes to disrupt the order of market competition, or to undermine the legitimate rights and interests of consumers or other operators.

The Antitrust Law also aims at improving social benefits by preventing adverse impacts arising from monopoly, and, providing a good environment for innovation and consumer protection, which contributes to the sustainability of the economy and society of China.


4 . What, if any, litigation or enforcement activity has your jurisdiction seen related to ESG?

Enforcement in relation to ESG is comprised of a wide range of actions within different legal departments as there is no consolidated legislation on ESG. Some major cases in China were in breach of Antitrust Law, which touches on themes falling within social responsibility. In 2021, The Anti-monopoly Bureau of the State Administration for Market Regulation imposed a CNY 18 billion fine on Alibaba for its monopoly in the online retail business and, in the same year, imposed a CNY 3 billion fine on Meituan for using platform algorithms to impose discrimination measures on those who cooperated with competitors.

Enforcement actions for environmental protection also regularly occur. For example, in 2020, Jinyuanli Chemical Co., Ltd., was fined CNY 150,000 by Changji Ecological Environment Bureau following harmful gas emissions.  


5 . What are the major non-law/regulatory drivers of ESG trends and developments in your jurisdiction?

Soft non-binding laws

In 2018, the CSRC revised the “Governance Guidelines for Listed Companies”, stipulating that listed entities have a responsibility to disclose ESG information. They deemed "sustainable development" and “green development” to be the guiding principles for the companies to consider. 

Following that, the Asset Management Association of China released the “Green Investment Guidelines” and “ESG Evaluation System of Listed Companies in China”.


The government, as an important stakeholder, is proactive in the promotion of ESG. In 2020, President Xi Jinping promised the world at the 75th United Nations General Assembly to “make efforts to achieve carbon peak by 2030, and make efforts to achieve carbon neutrality by 2060”. This “dual carbon” goal was officially written into the “Government Work Report”, which has prompted more companies to pay attention to the issues of ESG and study the impact of ESG on their business operations, in order to get more favorable treatment from the government.

However, the requirements to release ESG related data or disclose their ESG reports to the market without specific guidelines has caused an increase in greenwashing. Greenwashing has become a concern for the industry in China, but there is still a lack of laws or regulations to fundamentally prevent greenwashing.


6 . Are the laws, regulations and obligations highlighted in Question 2 primarily related to corporate disclosure?

Yes. There are some statutory obligations for disclosure. For example, the “Environmental Impact Assessment Law” requires companies’ prior disclosure about their planning when they intend to start construction, add more production lines or increase the capacity of the existing facilities. Additionally, the “Work Safety Law” requires companies to disclose to the relevant government authority any potential hidden dangers found during the companies’ regular inspections.


Some listed companies or other large companies may voluntarily choose to disclose an annual ESG report and the government and stock exchanges encourage companies to do the same. These ESG reports can be usually found on the investor relationship webpage of the companies’ official websites, and, for companies listed in China, they may disclose the reports in the form of a public company announcement through the stock exchanges. However, there are no standard metrics, accounting mechanics or frameworks which are consistently used in these voluntary disclosures.

Notably, legislators and regulators are considering the compulsory disclosure of ESG reports, and the Shanghai Stock Exchange requires the companies listed on the STAR MARKET to comply with the obligation to disclose an ESG report.


7 . Which sectors are most impacted by ESG in your jurisdiction? How significant is ESG investment in your jurisdiction?

Private equity

The Asset Management Association of China released the “Green Investment Guidelines” and the “ESG Evaluation System of Listed Companies in China” in 2018, which requires the mutual funds and private equity funds investing into securities to follow the Green Investment Guidelines to formulate their internal green investment policy, set up certain positions and employ analysts to have in-depth analysis on the green investment targets, and, submit self-evaluation forms on their managerial and policy adjustment, as well as the performance of green investment. Private equity funds investing into private company equities can choose to follow the above guidelines. Recently several private equity fund management companies have established their ESG compliance program in accordance with the above guidelines.

Real estate industry 

Real estate companies have far greater capacity to impact the environment due to the nature of their business. Their ESG reports suggest that they have directly improved the means of their business ventures to better suit modern sustainability expectations by developing their environmental standards and driving building renovations into impoverished communities. Vanke, one of the largest real estate companies in China, is an example of this. Vanke decided to collaborate with nature in their projects by promoting the practice of “green building”, by formulating a “green standard” scale where projects can be star rated by their fulfillment of the goals of “green building”. By using sustainable materials that do not degrade the environment and by incorporating elements of nature in their projects, Vanke has come up with interesting pieces of architecture such as the Mega Eco Botanical Garden in Shanghai. Furthermore, not only is “green building” reintroducing nature back into cities, it is also a system that encourages sustainable energy sources.


In China people rely heavily on e-commerce. The e-commerce companies in China are also commercial giants with huge capital to make investment. As a result, e-commerce companies can have a great impact on ESG by bringing attention to it when guiding consumers, allocating internet traffic, and making investments. For example,, one of the largest e-commerce platforms, has developed governance structures, which divide responsibilities into decision-making and execution teams. Notably, hires experts from various fields and employs current members of the company in order to define objectives, execute initiatives, and collaborate with investors to better the impact of a company’s ventures. 

Other examples are e-commerce food delivery platforms such as Meituan and Meituan launched the “Green Mountain Scheme” in 2017, which is an action for protecting the environment. It aims at making progress to reduce the waste generated from food delivery and its packaging, by investing in R&D in this regard and working together with government departments, professional institutions, experts and scholars. has made some efforts in social responsibility, by exploiting their advantages as a platform. For example, cooperates with the consumers, charities and some of the in-platform restaurants and cafes to build up a community; consumers can find those restaurants and cafes with the “love” tag, and a part of money they spent in these restaurants and cafes will be donated to support children in rural areas to get enough and healthy food.

Game industry 

The gaming industry is kept alive by fostering a competitive but non-toxic atmosphere for consumers. One of the greatest hindrances to this ideal is the expression of insults and slurs in games or the game-community. Tencent, as the largest game company in China, tackles this issue by promoting healthy games implementing a real-name system along with an anti-addiction system in accordance with regulatory requirements. Such a system links one’s online persona to their physical one and suggests implications for breaking in-game regulations. Furthermore, even more regulations are created for minors to regulate their experiences in games and the game community. Namely, systems are put in place to allow parents more moderation over children’s purchases and screen time. Although these measures may restrict Tencent and other game companies from earning more money, these constraints are part of their social liabilities.


8 . What are the trends in your jurisdiction regarding ESG governance?

With strong public encouragement, large corporations have implemented ESG governance. In the case of Tencent, an ESG working group directly led by the Board of Directors was launched to carry out ESG related matters. Similarly, as mentioned above in Question 7,, one of the largest e-commerce platforms, also developed ESG governance structures, which divided responsibilities into a decision-making and execution teams. Notably, hires experts from various fields and employs current members of the company to define objectives, execute initiatives, and collaborate with investors to ensure that the company’s business and investments are making better impact. Other leading companies in China follow suit and have been developing their own ESG management program.

In some finance institutions in China, the role of a Chief ESG specialist has become extremely important. For example, Ping An Bank has implemented a thorough managerial and strategical mechanism to improve ESG related performance and to ensure sustainability. Notably, Ping An Bank has a Chief ESG specialist and a team specializing in ESG, which contributed to Ping An Bank’s award of “Best ESG” (awarded by the Institutional Investor magazine, 2022).


9 . To what extent are ESG ratings or ESG benchmarks relied upon in your jurisdiction?

ESG rating agencies

It is generally investors who use ESG rating agencies to evaluate the ESG performance of an investment target, in order to decide whether they should take a step further and make an investment. In China, the leading international ESG rating agencies’ ratings and reports are commonly accepted by investment managers or finance institutions when they evaluate a company’s ESG performance, such as MSCI ESG, S&P ESG Index, Bloomberg and Morningstar. At the same time, several other rating agencies, such as Wind ESG Rating and Sino-Securities ESG Rating, have been providing ESG ratings covering most A-share Listed companies. Companies rarely directly engage with ESG rating agencies, however, companies (especially listed companies and large companies) may meticulously prepare their ESG related information to feed the ESG rating agencies, in order to improve their own ESG ratings.

ESG benchmarks 

ESG benchmarks like MSCI World SRI Index or Sustainalytics ESG benchmarks are usually used by mature institutional investors during their decision making of ESG related investment. Some of these published ESG benchmarks may be used as a reference by investment institutions or finance institutions when they formulate their internal ESG benchmarks.


10 . What is the role of the private markets versus public markets in driving ESG developments in your jurisdiction?

Private companies 

Usually, private companies might focus on developing an environmentally friendly supply chain as their “selling point” to attract consumers and investors. Private companies planning to go public may emphasize their ESG performance so as to build up an advantage in attracting international funding and make early preparation for any future listing. For example, in April 2021, Cainiao Guoguo (a courier company mainly distributing online shopping parcels) launched an environmental protection event called Ocean Parcel That Cannot Be Refused. During this event the participants received parcels for free, but were shocked to find that they contained only plastic bottles, bags and straws, together with a letter. In this letter, Cainiao Guoguo provided data about the polluted ocean, and reminded the recipients to protect the ocean by reducing waste. This event turned out to be a great success for Cainiao Guoguo, greatly improving its brand reputation. Some investors believe this is a step taken by Cainiao Guoguo for attracting more attention from investors and preparing for its public offering in the future.

Public companies 

Some state-owned public listed companies are proactive in making positive responses to ESG issues and in several industries, such as electric power, coal, dairy and liquor, ESG ratings of state-owned public listing companies are higher than private listed companies’. State-owned public listed companies are, to some extent, the pioneers echoing national policies, such as “dual carbon”, energy and resources conservation, compliance discharge of pollutants, product safety and quality as well as protection of labor rights and interests, which are also the highlighted focus of ESG.

Beyond ensuring regulatory compliance, we’ve observed activities of some public companies who are proactive in developing approaches to ESG issues. For example, some are making donations to charities or schools at areas of poverty, and, others are designing buildings or developing building materials which are energy-saving. These actions go way beyond regulatory compliance.

Public companies and private companies may address ESG issues in their disclosure and also in their products and services, to attract consumers and investors. However, we’ve not seen publicly discussed cases of divestment purely for bad ESG performance in particular. 

ESG agenda 

No official regulation or policies relating to ESG agenda implementation have been observed in China. Which means the enterprises may voluntarily set up an ESG agenda, but it’s not compulsory and the government will not monitor the enterprises on this. However, in March 2022, State-owned Assets Supervision and Administration Commission under the PRC State Council established the Social Responsibility Bureau, whose responsibility is encouraging companies, especially state-owned companies to actively put ESG into practice. It is also an unofficial signal implying that the ESG agenda has become more popular and will become a tendency for all companies. 


11 . What are the major challenges in terms of compliance for companies under ESG obligations?

Given China is still in its initial stage of ESG integration, companies are facing significant challenges. Considering the impact of the COVID-19 pandemic and the downturn of the economy, commercial benefit has been positioned as the primary target by most companies. Under this economic pressure, companies may trade off the ESG compliance for boost in output. 

However, since the implementation of the “dual carbon” goals, companies are also faced with pressure from a regulatory perspective. Companies falling under “upper limit” policy (i.e., for enterprises that have not conducted the actual measurement of elemental carbon volume in coal in 2019, the carbon volume in unit heating value shall be calculated at 33.56tC/TJ) would afford more carbon emission after calculation, and these companies may consider circumventions of the above consequence and may end up with data fraud. 

Nevertheless, regulation has reinforced the supervision of data disclosure, such as environmental data. Administrative Measures for the Mandatory Disclosure of Environmental Information by Enterprises was promulgated on December 11, 2021 by the Ministry of Ecology and Environment and took effect on February 8, 2022, specifying the content, form and timing of disclosure by the companies with great environmental impact and high public concern and related supervision measures with penalties if companies fail to comply. The above measures are aimed at preventing data fraud and greenwashing in sustainability statements. With these mandatory regulatory requirements for disclosure, companies may have to set up specific positions or may have to purchase and install certain devices in order to get prepared for data reporting, which may increase the companies’ costs in a short term.


12 . What information sources are most relevant for ESG considerations in your jurisdiction?

Normally, aside from the information acquired from self-disclosure by the enterprises, such as annual reports, ESG reports, Company Social Responsibility reports (CSR report) and announcements by listing company, information acquired from NGOs, academics, government, news and social media is also important for reference. Among others, in China, statistics disclosed by NGOs constitute an important ESG consideration. The Institute of Public and Environmental Affairs (IPE), a non-profit environmental research organization registered and based in Beijing, has built a database of environmental information – Blue Map website – collecting, collating and analyzing government and corporate environmental information, including environmental monitoring data. However, the data acquired from NGOs shall be cleaned and deduplicated before being taken into account for the ESG rating.


13 . Has your jurisdiction developed a Taxonomy related to ESG?

In July 2020, coordinated by the International Platform on Sustainable Finance (IPSF), the EU and China initiated a Working Group on Taxonomies with the objective to undertake a comprehensive assessment of the existing taxonomies for environmentally sustainable investments, including identifying the commonalities and differences in their respective approaches and outcomes. In November 2021, the IPSF Taxonomy Working Group published the first version of the Common Ground Taxonomy (CGT) report, and, issued a call for feedback to solicit comments. After that there was a second version of the CGT report. At this stage the CGT report is only a draft of the overview between the EU and China taxonomies within the scope of the instruction report with no legal effect and is not formally endorsed by IPSF member jurisdictions. The result does not create either a common or single taxonomy or a standard that is mandatory for IPSF member jurisdictions.

To our knowledge, there is no ESG related Taxonomy published within the jurisdiction of China yet. Some finance institutions may have developed their own standard to classify clients or targets from an ESG perspective.


14 . What does the future hold for ESG in your jurisdiction?

As ESG is still a new topic in China, it is attracting companies’ and investors’ attention. In the short term, ESG will continue to play a role in the market value management of large companies as a tool to convince investors that the companies are paying attention to good governance, sustainability and so on, in order to increase the share price. 

In the medium term, we are expecting a more standardized matrix for ESG related disclosure, evaluation, financing and investment. Once this happens, ESG performance may become an index like credit scores; on the other hand, banks, insurance companies, investors and regulators may have developed precise measures to prevent greenwashing or similar tricks. Consumers and investors may develop a more comprehensive understanding of ESG, impacting their choice when they purchase products or invest into companies or projects which are highlighting their good ESG performance. They will be more cautious about the price mark-up driven by the ESG costs or even only by the ESG concepts. 

In the long run, good governance may maintain company stability. Improvement in environmental protection may in return drive the companies to explore more energy saving technologies in their production and which may also save costs in the long run; and, proactively taking on social responsibilities may improve the companies’ image and win trust from consumers, investors and regulators, which will also help companies win market shares and create a good environment for financing. We remain positive for the future of ESG in China.




Guillermo Jorge
Pablo Crimer


Vanessa M. R. Hall


Carolina Queiroga Nogueira
Thiago José da Silva


Juan Antonio Parodi
Raúl Álvarez
Verónica Cuadra

European Union

Patricia Volhard
Geoffrey Burgess
Jin-Hyuk Jang


Anniina Järvinen
Annika Schauman
Johanna Vanninen
Laura Sainio
Tero Pikkarainen


Christina Heil
Jin-Hyuk Jang
Patricia Volhard


Fabio Gallo Perozzi
Federico Longo
Giuseppe Taffari
Roberto Randazzo


Yasuyuki Kuribayashi
Yuko Toyoda


Diego Sierra
Edmond Frederic Grieger
Elias Jalife
Luis Burgueño
Pablo Jiménez


Davine Roessingh
Dennis Horeman
Jasper van Uden


Claudio Ferrero Merino
Francisco Tong
Tomás Denegri Vargas
Ursula Zavala

South Korea

Curie Lee
Eugenia Stavropoulou
Hye Sung Kim
Sae Youn Kim


Emma Greiff
Jenny Lundberg
Joel Montin
Rezan Akkurt


Dr. Martin Eckert
Lars A. Fischer
Stephan F. Greber

United Kingdom

Jannis Bille
Rebecca Perlman
Sebastian Morton
Silke Goldberg

United States

Andrew M. Levine
Caroline N. Swett
Ulysses Smith

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