The Climate Information Disclosure Maturity of China's Top 500 Listed Companies released

source:goldencsr date:2024-04-19 17:38:44

The fragrance of flowers, the songs of birds, and the growth of grass all speak for the spring of nature. When we wander amidst the blossoms and soak in the beauty of spring, might you also realize that there could be hidden SOS from nature?

Recent reports about "climate warming causing early blooming of cherry blossoms and others" have sparked social concern and repeatedly trended on hot searches. Global climate change has been pointed out to not only disrupt the original ecological balance and force changes in the habits of animals and plants, but also pose significant challenges to the global economy and society.

Celeste Saulo, Secretary-General of the World Meteorological Organization (WMO), has stated that the climate crisis is exacerbating the crisis of inequality, affecting all aspects of sustainable development and undermining efforts to address issues such as poverty, hunger, health, displacement of people, and environmental degradation. In the Global Risks Report 2023, the World Economic Forum also solemnly identified "failure to mitigate climate change", "failure of climate-change adaption", and "natural disaster and extreme weather events" as the most severe global risks for the next decade.

Just as all solutions for crises ultimately fall upon the innovation of the business world and corporate organizations, under the pressure and promotion of regulators and public opinion, actively responding to climate change and proactively disclosing climate information have become the unavoidable responsibilities of pioneering companies. Whether in the macro context of international cooperation or in the micro context of corporate operations, climate information disclosure has never been more a consensus for companies to fulfill their social responsibilities, carrying significant value of contributing to global sustainable development.

Within the broader scope of addressing climate change, listed companies, as the micro foundation of high-quality economic development and the basic units of climate action, bear the mission and responsibilities of the times. The climate risk management and disclosure level of China's Top 500 listed companies not only reflects their own efforts to promote sustainable development, but also, to a certain extent, represents the responsiveness and management level of Chinese companies in disclosing information on climate change.

Based on these issues, GoldenBee Consulting released the Climate Information Disclosure Maturity of China's Top 500 Listed Companies, aiming to support more companies to better disclose climate information and help them enhance the substance and accuracy of their disclosures.

In line with the requirements of IFRS S2, the report studies on China's Top 500 listed companies in 2023, sorts out the current state of disclosure, summarizes highlights and difficulties, and suggests actions based on the findings.

· What is the maturity of the climate information disclosure of China's Top 500 listed companies?
· What are the differences in the level of climate information disclosure among companies of various scales,
natures, and industries?
· What are the difficulties for company to disclose climate information?
· How aware and capable are companies in leveraging market forces to address climate issues?
· What is the percentage of disclosure linking executive compensation to climate-related factors?
· How is company climate information reflected in strategic planning, risk management, and objective setting?
......

Based on IFRS S2, the report has the following findings after comprehensively assessing the core issues about climate information disclosure level of China's Top 500 listed companies:

Progress in climate information disclosure

· In 2022, 472 of China's Top 500 listed companies independently published ESG/CSR/sustainability reports, and 31 companies published climate information disclosure reports in addition to regular ESG/CSR/sustainability reports.
· Faced with the uncertainty of climate-related risks, some pioneering companies have recognized the importance of taking climate actions and the upcoming significant adjustment to their business models. These pioneering companies have begun to explore paths or methods for the board of directors or management to participate in climate risk management and to work on establishing and improving their own climate governance structures.
· Among China's Top 500 listed companies, all financial companies (47 in total) have published ESG/CSR/sustainability reports and emphasized that they will promote climate-related investment and financing or green finance through their main business. Relatively clearer climate risk management guidance and stricter regulatory requirements contribute to the better disclosure of financial institutions.
· Among China's Top 500 listed companies, 40.80% has set board-level climate risk and opportunity supervision bodies/individuals. About 60% of these companies have clearly defined climate governance responsibilities in the Articles of Association, management methods, post responsibilities, or other policies.
· Leading companies use the Recourse and Deduction of Performance-Based Compensation that meets the further requirements of IFRS S2 for disclosing linkage methods, which can to some extent avoid companies from adopting nominal pay linkage or solely rewarding sustainability awareness without punishing insufficient response.
……

Insufficient disclosure of climate information

· The maturity of climate information disclosure among China's Top 500 listed companies is overall at a low level, unable to meet the requirements of S2.
· Only 6% of companies have disclosed that board-level bodies or individuals have relevant backgrounds or capabilities, and only 10% of companies have disclosed governance-level review and supervision procedures for climate risk and opportunity-related objective setting and progress.
· Only 30% of companies have established positions or bodies to manage climate-related risks, and only 20% of companies have disclosed how management-level bodies operate in conjunction with other departments. More than 80% of companies lack supervision methods for risk management bodies/positions, and more than 75% of companies lack control measures and procedures for supervising climate risks and opportunities.
· The disclosure rate for climate risk financial status and performance is extremely low, with very few companies able to disclose their assessment of the capability for climate risks adaption.
· The number of companies using Climate Scenario Analysis to assess climate resilience and the disclosure rate for parameters are relatively low, and most companies' understanding and capabilities in applying climate scenario analysis are still far from meeting disclosure expectations.
· The disclosure rate for detailed content on climate risk management is low, and climate risk management often remains at the superficial level without genuine implementation.
· Nearly 50% of companies have disclosed Scope 1 and Scope 2 emissions data, but the coverage of Scope 3 emissions disclosure is less than 10%. Existing carbon emission indicators are insufficient to show the full picture.
……

Summary and Recommendation

· Governance: Establish a top-down climate governance structure to enhance the systematic and comprehensive nature of climate governance.
· Strategy: Deeply understand and recognize climate risks and opportunities, and position climate strategies towards a more distant future.
· Risk management: Start from the beginning to initialize climate risk management and then fully integrate it into the company's risk management system.

· Indicators and objectives: Focus on the process-oriented and quantitative disclosure of indicators and objectives, improving the accuracy and scientific nature of disclosures.