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Chinese Companies Must Improve Emissions Disclosures From Supply Chains To Aid China Net-Zero Goal


Chinese companies must improve their disclosure of carbon emissions, particularly along their value and supply chains, for investors to appropriately assess economic risks posed by climate change and support the country’s drive to meet its dual carbon objectives, according to an asset manager.

According to a sustainable equity portfolio manager, reporting indirect greenhouse-gas emissions from a company’s suppliers or value chain – known as scope-3 emissions – has been especially difficult for firms in China and other emerging-market economies still in the early stages of their sustainability journeys.

“When we speak to certain firms in China that aren’t reporting scope 3 for now, they might have a supply chain that includes 1,000 companies all over the world or in various areas, and it is challenging to piece together all of that information,” the sustainable equity portfolio manager said.

He also stated that scope-3 emissions account for around 75% of the carbon risk in global equities. According to the sustainable equity portfolio manager, “If you don’t understand the carbon intensity of a supplier chain or the whole value chain, you may be overlooking some carbon risk within a company or linked with a company.”

“China companies are increasingly taking carbon emissions reporting extremely seriously,” an investment firm stated. “This is partly due to the overall government’s ambition to meet the dual carbon objectives.”

For the past 18 months, the investment company has been working with Chinese companies where it invests in pushing them to publish disclosures and establish clearer road maps to net-zero carbon. The investment company contacts portfolio firms via letters and in-person meetings to urge change while gauging company culture and reactions to the initiative.

The International Sustainability Standards Board (ISSB), a new agency established in November 2021 during the global climate discussions in Glasgow to consolidate various standards for ESG reporting, will mandate Scope-3 emissions reporting.

According to its website, the ISSB intends to release its first standards at the end of the second quarter of 2023, which will go into effect in January 2024.


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