CICC ESG 2025 Outlook: Implementation Year of Carbon Peak Target Planning, Focus on Multiple ESG Investment Themes

CICC released a research report stating that the combination of ESG with domestic dual-carbon targets, climate action, rural revitalization, and corporate governance issues is based on the deep integration of international standards and local practices. The year 2025 is planned as the year for further implementing the carbon peak target domestically and as an important starting point for the implementation of corporate sustainable disclosure guidelines, focusing on the construction of a dual control system for carbon emissions, sustainable disclosure practices, and the implementation of the "five major financial articles" and other ESG themes. Key points from CICC are as follows: Theme One: Accelerating the integration of carbon indicators into economic planning and industrial management The establishment of a dual-control system for carbon emissions is accelerating, in line with the carbon peak and carbon neutrality targets. The General Office of the State Council issued the "Work Plan for Accelerating the Construction of a Dual-Control System for Carbon Emissions", which clearly requires the implementation of a dual-control system for carbon emissions during the 14th Five-Year Plan period, with intensity control as the main focus and total control as supplementary, to replace the original energy consumption control system and assessment system. The carbon emission dual-control mechanism is in line with the stage of China's carbon peak and carbon neutrality targets. We anticipate that in order to comply with the implementation of the carbon emission dual-control system during the 14th Five-Year Plan period, the construction of related infrastructure such as industry and enterprise carbon emission statistics and accounting standards, product carbon footprint standards, and greenhouse gas emission factor database may accelerate, laying the foundation for the integration of carbon indicators into economic and industrial planning. The improvement of mandatory carbon market and voluntary emission reduction trading systems, and the accelerated development of professional services. As the beginning of the expansion of the carbon market, the Ministry of Ecology and Environment will designate 2024 as the first control year for the newly included cement, steel, and electrolytic aluminum industries, with relevant enterprises and units already starting their first compliance cycle and expected to complete the first compliance work by the end of 2025. The Ministry of Ecology and Environment has issued the second batch of voluntary greenhouse gas emission reduction methodologies, covering coal mine methane recovery and utilization and energy saving in highway tunnel lighting. The vigorous development of the carbon market has brought about new opportunities for the carbon asset management industry. Theme Two: ESG disclosure enters a new development stage, regulatory guidance enhances corporate sustainable governance Global and domestic ESG disclosure rules are in place, promoting corporate sustainable governance. (1) International perspective: As the baseline for global ESG standards, the first two sets of international Sustainable Disclosure Standards (ISSB) issued by ISSB officially took effect on January 1, 2024. Companies can apply the ISSB standards for disclosure starting from the 2024 reporting period based on actual conditions. In addition, ISSB continues to cooperate with different jurisdictions and other international organizations. More jurisdictions around the world are expected to adopt or refer to the ISSB standards during 2024, increasing the global application of the ISSB standards. (2) Domestic perspective: With the guidance from multiple regulatory authorities such as the China Securities Regulatory Commission and the Ministry of Finance, China's multi-level, multi-subject, and multi-focus information disclosure policies have been successively introduced, and the corresponding policy system is gradually being established and improved. Theme Three: The "five major financial articles" in finance help high-quality development, seeking breakthroughs in sustainable equity investment The proposal of the "five major financial articles" to promote the development of new and high-quality productivity, combined with ESG concepts. The proposal to build a strong financial country with the "five major financial articles" has clarified five key areas for the coordinated promotion of high-quality economic and financial development - technology finance, green finance, inclusive finance, pension finance, and digital finance. The further integration of ESG sustainable concepts with the five major financial articles will help promote the development of new and high-quality productivity. Seeking breakthroughs in sustainable equity investment models, which may combine indexization, responsible management, and transformational finance models. Tests for sustainable investment include regulatory environment, market acceptance, alignment of investment strategies and goals, and so on. Sustainable equity investment and traditional equity investment differ in investment objectives, scope, strategies, and disclosure of information. Although sustainable equity investment currently faces challenges, it can still actively explore new development models based on its unique characteristics. The development of sustainable equity investment may combine indexization, responsible management, and transformational finance models to explore, and by emphasizing the concept of long-term value, enhance the market acceptance of related strategies. Risk warning: Domestic policy implementation falls short of expectations, and global climate action progresses slower than expected.