The quality of enterprise information disclosure and availability of data have always been major challenges faced by environmental, social and governance (ESG) investment. As the policy of “carbon peaking and carbon neutrality” has been included in the 14th Five-Year Plan (2021-2025), the ESG information disclosure and standardization urgently require “top-down” policies, regulatory supports and joint efforts of industry associations, stakeholders and all the departments in enterprises. In a recent interview with The Economic Observer, Professor Zhang Bohui, Presidential Chair Professor and Executive Dean of the School of Management and Economics at CUHK-Shenzhen, Director of the Center for FinTech and Social Finance at Shenzhen Finance Institute, and Associate Director of Shenzhen Institute of Data Economy, shared his opinion on “How Can ESG Help Listed Companies Realize High-Quality Transformation in Governance and Carbon Management.”
Professor Zhang said in the interview, “ESG is the concretization of sustainable development. The core of ESG is to take the internality (corporate governance) and externality (environment and social impact) of company management into consideration on the basis of traditional enterprise analysis, so as to measure the sustainability and competitiveness of companies’ development in a comprehensive way. From the perspective of regulations, strengthening ESG information disclosure can urge listed companies to act positively in applying the concept of sustainable development into practice. In the aspect of institutional investment, amid the rapid growth of global ESG investment, listed companies will take active actions in making high-quality transformation to enter the concept pool of ESG. In terms of investment income, pursuing ESG investment can strengthen companies’ ability to avoid high risks, flash crashes and ‘black swan’ incidents to obtain higher returns in the long run, which will eventually promote the transformation of companies. Besides, ESG is in consistent with China’s national strategy, so pursuing ESG concept can help companies establish positive image and win high reputation, enhancing their long-term value and promoting transformation. ESG provides guidance for companies in finding new growth points, enabling them to seize the opportunity of green consumption to develop low-carbon businesses.”
As for enhancing ESG disclosure of listed companies through strategic decision making and organizational structure, Professor Zhang said, “From the perspective of regulations, it is necessary to raise companies’ understanding about the policies and set standards for ESG information disclosure under the guidance of those applied in major countries. From the perspective of investment institutions, ESG strategy needs to be implemented in a “top-down” manner with the joint efforts of all departments, and the supervision of the board of directors on ESG affairs including ESG organizational structure, department function and strategic planning needs to be disclosed, in a bid to improve the ESG performance of listed companies and enhance their ESG information disclosure. As for companies, they are supposed to release ESG reports that can meet the requirements of ESG standards to ensure the credibility of reports.”
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