The Ministry of Finance of China, in coordination with nine relevant authorities, released the Corporate Sustainability Disclosure Standards No.1 – Climate (Trial) (hereinafter referred to as the “Climate Standard”).
Based on the consultation draft released last April, the Climate Standard incorporates refinements based on stakeholder feedback. It marks the establishment of China’s first thematic sustainability disclosure standard designed to standardise the disclosure of climate-related risks, opportunities, governance, strategies, and impacts by enterprises.
Aligned with the International Sustainability Standards Board’s (ISSB) climate-related disclosure standard IFRS S2, the Climate Standard adopts the global four-pillar framework (Governance, Strategy, Risk Management, Metrics & Targets) to facilitate interoperability, while introducing specific adjustments to accommodate local market maturity.
Key refinements from draft to final standard
Compared with the consultation draft, the final Climate Standard refines certain details while retaining the core four-pillar framework.
First, it intends to increase operational practicality and flexibility. The Climate Standard relaxes certain mandatory metrics; notably, it removes the requirement to disclose the specific percentage of executive remuneration linked to climate targets, focusing instead on whether and how climate factors are incorporated into compensation decisions. Additionally, it introduces a “market-based” method for Scope 2 accounting, allowing enterprises to reflect the decarbonisation benefits of green electricity purchases.
Second, it aims to align more closely with international standards. Regarding technical specifications, the Climate Standard explicitly permits reference to the Greenhouse Gas Protocol where national standards are absent. Terminology has been localised, replacing “carbon credits” with “purchased emission reduction quantities”, and adding disclosure requirements for the sale of such reductions.
Furthermore, the Standard intends to strengthen compliance rigour. It mandates consistency between climate disclosures and other legally required environmental data. It also emphasises the independence of third-party assurance bodies and expands internal oversight roles to include legal and other supervisory departments.
Objectives and regulatory significance
The Climate Standard is intended to support China’s goals of carbon peaking and neutrality through top-level design, guiding enterprises from observation to more substantive action. It serves as a policy instrument linking corporate climate governance to capital market behaviour.
The Climate Standard goes beyond establishing a transparent disclosure framework – it encourages enterprises to identify climate risks, develop low-carbon transition roadmaps, and scale up green innovation investment. By transitioning from external emission reduction pressure to internal governance and strategic action, it aims to prevent “greenwashing” and to improve the credibility and enforceability of climate information.
Additionally, by strengthening disclosure of financial correlations, the Climate Standard aims to improve market understanding of how climate information relates to financial performance. This is expected to help guide capital flows toward green and low-carbon sectors, providing market-based capital support for the low-carbon transformation of the real economy.
By introducing a “materiality principle”, the standard allows enterprises to tailor disclosure based on their own scale, operational complexity, and resource capacity. This moderates disclosure requirements across the board and lowers compliance costs for SMEs.
Phased approach
The Climate Standard follows a phased and differentiated implementation roadmap, mapping clear transition pathways: from voluntary to mandatory disclosure, from large corporations to SMEs, from qualitative to quantitative requirements, and from non-listed companies to listed companies with differentiated application routes.
This phased and differentiated approach aims to provide market response and preparation time, enabling enterprises to progressively strengthen their sustainable development governance and information disclosure capabilities. It also allows regulators to accumulate experience and manage expectations across stakeholders.
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