Idea of ESG catching on with enterprises

ESG is becoming essential for all companies and may be written as the fourth basic financial report – along with the balance sheet, income report and cash flow report, experts said at a recent forum when ESG has been catching on with various business communities.

The idea of ESG, which stands for environmental, social and governance, is becoming more well-known as the world moves toward green and sustainable growth.

China's "dual carbon" goals – its pledge to peak its carbon dioxide emissions before 2030 and achieve carbon neutrality before 2060 – demands all industries and communities place more emphasis on sustainable development.

"ESG is no longer an extra, but an integral part that should be considered in the whole production chain for all businesses," said Bao Yongjian, a professor at the School of Management, Fudan University.

"We used to focus on reducing enterprises' negative externalities through CSR, or corporate social responsibility, but ESG requires us to shift to the positive externality," Bao said at the ESG forum held at the Shanghai Penta Innovation & Entrepreneurship Institute.

Zhu Weiqin, the CEO of Shanghai Treasure Carbon New Energy Environmental Protection Technology Co Ltd, thinks that ESG gives good businesses a chance to make money from their skills in protecting the environment.

"One thing you have to do is build up a system to present your performance in the ESG," Zhu said. "Then you will get rewarded as there are plenty of means to encourage firms to be good ESG practitioners nowadays."

Zhou Xufeng, deputy secretary general of the public welfare foundation at China Business Network, said the requirement of ESG-related information disclosure will lead to a new round of reforms for corporate management.

"It is not the result of any short-term policies, investments, or projects, but an effort to seek sustainable growth that needs the integrated cooperation of all," said Zhou.

Shanghai issued an action plan in January to promote green finance in order to accelerate the overall green and low-carbon transformation of the economy and society.

The action plan aims for Shanghai's banking and insurance industries to essentially build a green finance and ecological service system that is compatible with the carbon peak by 2025.

Meanwhile, green financial services will be continuously improved. The balance of green financing is expected to exceed 1.5 trillion yuan (US$221 billion), while green insurance will also see its coverage expanded to over 1.5 trillion yuan.