"ESG Development Report on China's Environmental Protection Industry" released

On November 5, the 16th Environment and Development Forum hosted by the China Environmental Protection Federation was held in Wuxi City, Jiangsu Province. At the meeting, the ESG Professional Committee of the China Environmental Protection Federation released the "ESG Development Report of China Environmental Protection Industry (2024)"(hereinafter referred to as the "Report"). The "Report" provides a detailed analysis of the current ESG development status, information disclosure and existing challenges of environmental protection companies from the three dimensions of environmental (E), social (S) and corporate governance (G) of the environmental protection industry. The "Report" pointed out that the environmental protection industry has made significant progress in ESG information disclosure, green bond issuance, climate response, etc., but there is still room for improvement in report verification, governance improvement, and environmental quantitative indicator disclosure.

Lin Bin, member of the think tank of the All-China Federation of Industry and Commerce and director of the ESG Professional Committee of the China Environmental Protection Federation, introduced the "ESG Development Report of China Environmental Protection Industry (2024)"

The popularity of ESG concepts has increased, and the information disclosure rate has exceeded 40%

Data from the "Report" shows that in the past three years, the number of ESG reports issued in the environmental protection industry has increased steadily: in 2022, 36 environmental listed companies issued sustainable development reports will increase to 57 in 2024, and the information disclosure rate has increased from 26.7% to 42.2%, showing that the industry's emphasis on ESG concepts continues to increase. Especially among state-owned enterprises, the information disclosure rate has remained at a high level, showing the strong influence of policy promotion and social responsibility.

Not much. The information disclosure rate of the environmental protection industry is still in the middle among the 30 industries across the country. Compared with industries with high disclosure rates such as finance and energy, there is a certain gap.

According to the Shenwan first-level industry's statistics on the disclosure rates of ESG-related reports in 30 industries disclosed before May 31, 2024, the A-share listed financial industry has the highest disclosure rate of ESG-related reports, with the banking industry disclosure rate reaching 100%, and the environmental protection industry Ranked in the middle, with a disclosure rate of 41%. However, in horizontal comparison, the ESG disclosure rate of industries such as national defense industry, environmental protection, and power equipment will grow rapidly in 2024, among which, the environmental protection industry will grow by more than 6 percentage points.

Report preparation is gradually standardized, and third-party verification is still lacking

In terms of report preparation, more and more environmental protection companies are adopting the GRI (Global Reporting Initiative) standard for report writing. In 2024, 64.9% of environmental protection companies will refer to the GRI standard. In addition, the Shenzhen Stock Exchange's Sustainable Development Report (Trial) and the United Nations Sustainable Development Goals (SDGs) are also widely adopted, accounting for 47.4% and 42.0% respectively, reflecting the industry's great importance to international norms.

However, the "Report" also pointed out that currently environmental protection companies generally lack third-party certification, and only a few environmental protection companies, such as Beijing Enterprises Water, Capital Capital and Zhefu Holdings, have received MSCI ratings from international rating agencies.

Lin Bin, member of the think tank of the All-China Federation of Industry and Commerce and director of the ESG Professional Committee of the China Environmental Protection Federation, said that the integrity of corporate information disclosure and the authenticity of data are the core of third-party ratings, and report verification is an important part of ensuring the authenticity of corporate data. At present, the number of companies in the environmental protection industry conducting relevant report verification is small. Under the requirements of continuous standardization of corporate information disclosure and the authenticity of information disclosure, the lack of authoritative third-party report verification has a certain impact on the authenticity of corporate sustainable development information., may also lead to some companies to appear green-floating behavior during the information disclosure process.

Clean technology innovation becomes the focus, quantitative information disclosure needs to be strengthened

Environmental protection companies have made significant progress in climate response and clean technology innovation. The "Report" shows that in 2024, 42.1% of listed companies in the environmental protection industry listed "responding to climate change" as a substantive issue for companies, up from 20% in 2023. In addition, 87.7% of environmental protection companies actively promote the application and innovation of clean technologies, 61.4% of companies adopt "three wastes" treatment measures, 31% of companies carry out environmental protection training and volunteer activities, and 14% of companies participate in biodiversity protection, demonstrating the industry's diversified practices in green development.

Lin Bin pointed out that the environmental dimension focuses on the practical effectiveness of enterprises in environmental management, resource utilization, climate change response and biodiversity protection. Environmental management has the most outstanding performance, demonstrating the company's solid foundation and effective management in this field; however, the score rate of biodiversity protection indicators is less than 40%, which has become an obvious shortcoming for environmental protection companies, and there is an urgent need to strengthen investment and improvement.

In addition, it cannot be ignored that at this stage, there is still a large gap in the disclosure of environmental quantitative indicators by environmental protection companies. Taking carbon emissions as an example, only 31 companies have disclosed carbon emission information in scope 1+2, 10 companies have disclosed carbon emission information in scope 3, and as many as 48 companies have not disclosed any carbon emission information.

"Environmental protection companies need to further improve the level of information disclosure of quantitative environmental indicators, and truly reflect the green development status of enterprises through detailed data such as pollutant emissions, water consumption, electricity consumption and the proportion of green revenue. This is not only a positive response to national industrial policies, but also the key to enterprises achieving sustainable development and enhancing market competitiveness." Lin Bin pointed out.

However, the "Report" pointed out that although more and more environmental protection companies are exploring under the "double carbon" goal, few companies can truly integrate the "double carbon" goal into long-term strategies. Most companies mainly achieve carbon reduction through specific projects, but lack systematic strategic planning. In response, the China Environmental Protection Federation called on environmental protection companies to combine the "double carbon" goals with their long-term strategies to enhance their climate response capabilities.