China's sustainable investing shows no sign of letting up

Governance is improving

On the regulatory and disclosure front, China's push for better corporate governance appears uninterrupted by the epidemic.

The revised Securities Law came into effect in March, featuring a landmark section that supports class actions by shareholders for the first time in China.

Collective legal actions had been rare among Chinese shareholders for a lack of recourse as well as awareness. In a 2017 lawsuit against a listed company named P2P Financial Information, only 14 people out of tens of thousands of shareholders took part.

Although a Shanghai court awarded the shareholders in the end, their lawsuit could have been smoother had there been a wider participation and the backing of a dedicated legal clause.

Under the new Securities Law, impacted investors will become part of a class action against wrongdoers unless they choose to exit such an action. At the same time, a Shanghai court issued detailed guidance in March to simplify litigation procedures for class-action suits.

Chinese policymakers are also easing rules on stock incentive schemes for large SOEs, seeking to address an old problem of misaligned interests between their management and shareholders. More flexibility is being allowed in the design of incentive schemes, which used to follow rigid formats, while regulatory approvals are getting easier to come by.

A growing number of State-owned firms, including COSCO Shipping Ports, China Telecom and China Mobile, have recently introduced incentive plans.

Disclosure of ESG performance may become mandatory in the foreseeable future. The country's top securities watchdog, the China Securities Regulatory Commission, has been studying how to draft rules on ESG disclosures for listed firms, according to a November statement.

Although, as in many countries, the pandemic may be forcing China to prioritize growth more than anything else, it's encouraging to see a steady rise in ESG awareness largely intact. The policymakers charged with engineering China's economic recovery efforts would do well to seize this historic opportunity to deepen the country's sustainability push.

Paras Anand is chief investment officer for Asia-Pacific at Fidelity International, a global asset manager. Flora Wang is director of sustainable investing at Fidelity International.

The views don't necessarily reflect those of China Daily.