[2024-July-11]WG2 Webinar :Navigate the Instrument-level Sustainability Reporting

On July 11, 2024, the GIP Second Working Group hosted a seminar titled “Navigate the Instrument-level Sustainability Reporting” in Beijing. Experts from CACIB, ICBC, HSBC, Moody’s, and EY discussed the practices of product-level disclosure.

Carmen TSANG, Head of Sustainable Banking for Greater China at CACIB, highlighted four core principles for green financial products internationally: transparency, comparability, materiality, and third-party verification. She noted two ESG financing structures: (1) use-of-proceeds financial instruments such as green bonds and loans, which require detailed disclosures about project allocations and expected environmental benefits; and (2) performance-based products with ESG KPIs, which mandate reporting on KPI performance rather than fund allocation.

Tao CHENG, Expert from ICBC’s Asset and Liability Management Department, presented on ICBC’s practices in green bond issuance and disclosure. He emphasized that issuers should closely monitoring evolving disclosure standards, enhancing credibility and depth of disclosures, and focusing on environmental impact assessments.

ZHANG Huifeng, Managing Director for Corporate Sustainability, Asia Pacific, HSBC, discussed HSBC’s efforts in supply chain finance and ESG disclosures, pointing out that the amount of Scope 3 emissions often dwarf Scopes 1 and 2 but are poorly reported—only 38% of listed companies disclose Scope 3 emissions, with just 10% setting reduction targets. To address this, HSBC provides sustainable finance products, incorporating indicators like CDP and SBTi to encourage supply chain participants to undertake climate action and disclosures, helping clients achieve carbon reduction targets ahead of schedule.

Junying LOU, Associate Lead Analyst at Moody’s, offered insights into instrument-level sustainability reporting from a second-party opinion perspective.. LOU emphasized that disclosures for sustainable debt instruments focus on specific aspects like fund allocation and management, differing from institution-level disclosures. She outlined the role of SPOs in evaluating whether a bond framework aligns with international principles. LOU shared examples from Moody’s SPOs, explaining how high scores were achieved through comprehensive assessments of bond frameworks.

Judy LI, Leader of ESG Sustainability Services, EY Greater China, shared insights on recent trends in sustainability disclosures in China and other parts of the world, from the pesperctive of an accounting firm. In China, the release of the ISSB standards in April 2024 was followed by the Guidelines for Sustainability Reports for Listed Companies and a draft of the Basic Standards for Corporate Sustainability Disclosures in May 2024. Meanwhile, China’s green bond standards are increasingly aligning with international frameworks. Internationally, the EU’s CSRD introduced stricter disclosure requirements for financial institutions and large companies, including non-EU, non-listed firms that have EU subsidiaries or exceed certain employee thresholds.

The speakers also covered reporting requirements for other asset classes. Currently, green bonds and sustainable finance products are the primary focus of disclosure rules, while general bonds and other assets remain largely exempt. Most green loan and bond disclosures in China are voluntary. Even when regulators request reports or audits, itemized disclosures are not mandatory. However, the demand for carbon emissions-related disclosures is expected to grow in the near future.