On June 29th, 2023, IBA (International Bar Association) Asia Pacific Regional Forum upheld the online seminar ‘The Importance of the Arising ESG to the Relationship between law firms and Clients” chaired by Ms Caroline Berube, the Managing Partner of HJM Asia Law and the China Working Group Co-chair of the IBA. Lin Yang, Founding Partner, Global Partner, and Executive Chairman of Yingke Global Board of Directors of Yingke International, was invited as a main speaker at the seminar. Other speakers are Ms Ni Tianlin, partner of Junhe Law Firm, Mr Alexi Bonamin, partner of TozziniFreire in Brazil, and Mr Jeffery G Weiss, partner of Steptoe in America.
The topics discussed in the seminar include the current regulations of ESG in the US, Brazil and China, how different nations incorporate the ISSB (the International Sustainability Standards Board), the due diligence of ESG, and the litigation of ESG matters.
Regarding current regulations of ESG, Lin Yang pointed out that international law and treaties affect China’s domestic legislation and regulations. For example, a Work Plan for Improving the Quality of Listed Central State-Owned Enterprises (the “Work Plan”) was released by the SASAC of the State Council to make specific provisions for enhancing the quality of Listed Central SOEs. Moreover, the People’s Bank of China has launched a new regulation that requires commercial banks to set up their own ESG system and to conduct due diligence on ESG before providing any loans to clients.
With respect to the due diligence of ESG, Lind Yang pointed out that since ESG covers various matters, conducting due diligence on ESG may require the collaboration of different professionals. It can be increasingly challenging when it is cross-border due diligence. Lind also indicated that different international standards are addressing ESG matters, such as SASB, ISSB, and the standards issued by the World Bank and the United Nations. Choosing what standards as the guidance and framework to evaluate a company’s ESG performance and how to reconcile these standards with domestic law and regulations can be of technical sophistication.
With regard to the litigation risk of ESG, Lind Yang mentioned that now the primary risk lies in the greenwashing of companies. Some enterprises labelled their projects as green projects to acquire funds from financial institutions. However, in China, there is no specific law or regulations on greenwashing, which is now mainly dealt with under advertising law.