Top 10 Trends in Responsible Investment in China 2026

 
On January 20, 2026, SynTao Green Finance and the China Sustainable Investment Forum (China SIF) jointly released Top Ten Trends in Responsible Investment in China 2026. The report aims to identify emerging topics, regulatory shifts, and market changes early, helping stakeholders to better prepare for the decision making process and spot opportunities.. 
 
Trend 1 The “15^th Five-Year Plan” Bears New Potential for Green Finance Development in China
 
2026 marks the inaugural year of China’s “15^th Five-Year Plan” (hereinafter referred to as the 15^th FYP). Guided by high-quality development and the green and low-carbon transition, China’s responsible investment and green finance are expected to maintain steady growth, in contrast to volatility seen in European and U.S. markets. The 15^th FYP identifies carbon peaking and carbon neutrality as core objectives, calling for coordinated action to reduce emissions and pollution, expand green development, and support economic growth. This provides a clear policy foundation and direction for green finance.
 
The 15^th FYP also emphasizes the development of green finance, inclusive finance, technology finance, pension finance, and digital finance, the five major areas of finance identified by General Office of the State Council. The policy is expected to support continued double-digit growth in green lending in 2026. Synergy among the five areas will become more important. For example, green finance combined with inclusive finance can support the green transition of small and micro enterprises and farmers through tools such as green credit and green insurance. Green finance combined with digital finance can improve the identification of green assets through technologies such as the Internet of Things and blockchain. Financial institutions can explore these overlaps through product and service innovation.
 
Trend 2 Sustainability-Linked Products Continue the Growth with External Review to Prevent “Greenwashing”
 
As growth in “pure green assets” slows, transition finance shows immense potential. Internationally, the International Capital Market Association’s (ICMA) Climate Transition Bond Guidelines (released late 2025) will support the development of transition bonds. Domestically, China is piloting transition finance standards in selected regions for steel, coal power, building materials, and agriculture. Standards for seven more sectors, including shipping and chemicals, are being developed, with further progress expected in 2026.
 
Sustainability-linked products, such as sustainability-linked bonds (SLBs) and loans (SLLs), are attractive to issuers due to their unrestricted use of proceeds, requiring only linkage to specific performance indicators. These products are expected to continue growing in 2026. However, as transition finance inherently covers high-emission sectors, investors must remain highly vigilant against “greenwashing” risks. In practice, reaching consensus on the selection and consistency of Key Performance Indicators (KPIs) is challenging, coupled with prudent requirements for indicator credibility and enforceability. Consequently, the growth in SLB issuance volume meeting the criteria of the Climate Bonds Initiative (CBI) SLB Database remains relatively limited. To prevent the risk of transition wash, external reviews for SLB and SLL will become crucial. External review on the scientific basis of transition plans, the ambition of target setting, and enhancing disclosure transparency will significantly boost investor confidence.
 
Trend 3 Coverage on Emission Reduction Expands, and "Orderly Transition" Reaches Consensus
 
In September 2025, China updated its Nationally Determined Contribution (NDCs) committing to reduce economy-wide net greenhouse gas (GHG) emissions by 7%-10% below the peak level by 2035, striving to achieve better results. This commitment involves two significant changes.
 
First, "economy-wide" means the scope of emissions reduction expands from traditional high-carbon sectors like power and manufacture to include agriculture, food, and other sectors. Second, it covers all types of GHGs, with more attention paid to reducing non-CO2 GHGs like methane and nitrous oxide, particularly methane emissions from the energy sector (coal, oil and gas) and agriculture. Agricultural methane reduction will primarily focus on animal husbandry, achieved through improved feed quality, optimized management, and promoting resource utilization of manure. The expansion of the carbon market aligns with these changes. In 2025, the National carbon Emissions Trading System (ETS) newly included steel, cement, and aluminum smelting. China GHG Voluntary Emission Reduction Program (CCER program) added 12 new methodologies, including those for large-scale pig farm manure biogas recovery and utilization projects. As planned, the ETS will essentially cover major emitting sectors in manufacture and utilities by 2027, while the CCER will achieve comprehensive coverage in key areas. Opportunities for financial institutions to participate in carbon markets will gradually increase.
 
Globally, an orderly transition has reached consensus. In developed countries, concerns over energy security and affordability continue to rise, with financial markets increasingly emphasizing a just transition. In China, the government consistently stresses the balance between growth, employment, and carbon reduction, avoiding "campaign-style" carbon reduction. Under the current economic situation, emissions reduction policies will pay more attention to pacing and sectoral differences, supporting the stable transition of traditional industries through a combination of fiscal, financial, and technology policies. Financial institutions should closely monitor the pace of policy implementation.
 
Trend 4 Extreme Weather to be Included into Stress Testing as Physical Risks are too Important to Ignore
As extreme weather events increase in frequency and intensity globally, the potential economic losses and financial risks posed by physical risks can no longer be ignored. Infrastructure like power and transportation, and climate-sensitive industries like agriculture, fisheries, and tourism will be exposed to higher physical climate risks, making it necessary to fully assess risks and take countermeasures. This presents both challenges and opportunities for the insurance industry. On one hand, demand for related risk coverage grows; on the other, claims pressure surges due to disasters. Therefore, insurance companies need to innovate insurance products and reassess the accuracy of catastrophe models while adjusting premium and reinsurance strategies. Other types of financial institutions, such as asset managers, should also identify, assess, and manage physical climate risks based on their business characteristics and risk control processes to enhance the resilience of their portfolios.
 
From a financial stability perspective, climate risk stress tests by banks and other financial institutions used to simulate the impact of transition risks of asset values mainly based on rising carbon prices. As the impact of physical risks increases, incorporating factors like extreme weather into stress testing frameworks will become an important direction. Regulatory authorities are expected to guide banks and other financial institutions to assess the risks and resilience of their portfolios under specific climate scenarios (e.g., once-in-a-century floods, sustained high temperatures). This requires financial institutions to not only focus on corporate carbon emissions data but also obtain information on asset locations, climate adaptation capabilities, business continuity plans, etc., posing higher demands on data granularity and model complexity.
 
Trend 5 The "Inaugural Year" of Mandatory Reporting Rises the Requirement for High Quality Disclosure
 
According to the sustainability reporting guidelines issued by the Shanghai, Shenzhen, and Beijing Stock Exchanges in 2024, over 400 listed companies, including those on the SSE 180 and SZSE 100 indices, must publish sustainability reports starting from the 2025 fiscal year. Simultaneously, the Hong Kong Exchange's (HKEX) climate-related disclosure requirements also take effect from the 2025 fiscal year. Consequently, 2026 will be the first year for mandatory sustainability or climate reporting, with report quality becoming a focal point for regulators, investors, rating agencies, and other stakeholders. Current disclosure challenges mainly include: applying the double materiality principle; carbon emission disclosure  especially Scope 3 emissions; and conducting climate scenario analysis and resilience assessment. Leading listed companies that implement the guidelines with high standards and strict requirements could become benchmark practices. Investors can also play a positive role by encouraging listed companies to improve information disclosure, particularly decision-useful information, and by better utilizing climate information in investment practices to create positive feedback for companies disclosing climate-related information.
Further climate-related disclosure requirements will focus on the following topics:  calculating Scope 3 emissions across the entire value chain, formulating credible transition plans, and setting science-based climate targets. The challenges will be advantages for early movers. Large listed companies can proactively build capacity to meet potentially higher disclosure requirements in the future.
 
Trend 6 Sustainability Report Assurance Expands Beyond Leading Companies, and Standards are Being Gradually Introduced
 
With the rapid increase in the number of sustainability reports, assurance aiming at enhancing reliability and credibility has become a direction encouraged and guided by regulators. The Ministry of Finance's sustainability disclosure standard explicitly encourages enterprises to provide independent sustainability report assurance statements. The HKEX plans to consult the market in 2027 on report assurance and phased implementation approaches. Listed companies should take proactive steps to prepare for assurance. In terms of market practice, both in the A-share and Hong Kong markets, the number and proportion of assured reports are increasing year by year; about 70% of large listed companies have their reports assured in Hong Kong. This trend is expected to further spread from leading listed companies to more medium-sized and even some small enterprises.
 
Simultaneously, standardizing assurance practices is on the agenda. In the Hong Kong market, the Hong Kong Institute of Certified Public Accountants (HKICPA) issued the HKSSA 5000 in March 2025, aligning with the international ISSA 5000 standard. In December 2025, the Accounting and Financial Reporting Council (AFRC) in Hong Kong published consultation paper on mandatory assurance requirements. In the mainland market, the Chinese Institute of Certified Public Accountants (CICPA) issued the consultation draft of assurance standard for sustainability information in July 2025, with an official version release expected in 2026. These developments will help regulate the assurance market and promote assurance practices.
 
Trend 7 Nature Disclosure Opens a New Chapter, Supporting Biodiversity and Blue Finance Development
 
Biodiversity loss has become one of the world's most important systemic risks. The launch of the Taskforce on Nature-related Financial Disclosures (TNFD) framework in 2023 provides a tool for companies and financial institutions to identify, assess, manage, and disclose nature-related risks and opportunities. In 2024, the International Sustainability Standards Board (ISSB) and TNFD officially began collaboration. In 2025, the ISSB announced it would complete the exposure draft for nature disclosures (i.e., IFRS S3) by October 2026, ahead of the 17th meeting of the Conference of the Parties (COP17) to the Convention on Biological Diversity (CBD). This will open a new chapter for nature disclosure. Besides CBD COP17, UNCCD COP17 (August) and UNFCCC COP31 (November) are also noteworthy events for nature initiatives and collaborations.
 
Nature disclosure serves the purpose of boosting biodiversity finance. In 2025, the People's Bank of China (PBOC) began piloting the "Biodiversity Finance Taxonomy" in selected regions. Early results, financial product innovations, and potential wider application of some outcomes are expected to be seen in 2026. Furthermore, as a sub-field of nature finance, blue finance will gain attention from coastal regional governments and financial institutions. Some coastal cities are expected to increase the use of financial tools like blue bonds, blue credit, and blue insurance to support projects related to marine conservation, sustainable fisheries, and marine pollution control, opening a new "blue" track for green finance.
 
Trend 8 China Strengthens Corporate Social Responsibility Overseas, Supporting High-Quality “Belt and Road” Cooperation
 
The 15^th FYP explicitly proposes promoting high-quality “Belt and Road” cooperation, emphasizing "people-to-people connectivity" with partner countries and coordinating the advancement of major landmark projects and "small yet smart" livelihood programs. This requires Chinese enterprises to strengthen their overseas social responsibility, especially on the impacts of projects on local communities, the ecological environment, and labor rights. In recent years, government agencies have issued intensive policies for guidance on overseas social responsibility. For example, the State-owned Assets Supervision and Administration Commission's (SASAC) Guiding Opinions on Central Enterprises Fulfilling Social Responsibility with High Standards in the New Era issued in 2024 set clear requirements for the ESG performance of central enterprises' overseas operations. At the end of 2025, the Ministry of Commerce issued social responsibility guidelines for Chinese enterprises operating overseas, encouraging companies to fully integrate social responsibility into their transnational strategies, decision-making, and corporate culture, including promoting host country on better livelihood and social harmony, supporting host country on environmental protection and green transition, and fostering healthy and sustainable industry development.
 
Large enterprises, especially central state-owned enterprises (SOEs) and major private enterprises, should proactively align with international standards, establish sound ESG risk management systems for overseas projects, strengthen localized operations and community communication, and transform ESG from a cost into a source of competitiveness that enhances brand reputation, secures local social license to operate, and mitigates political risks. Commercial banks with overseas business should also reference international common practices, and strengthen ESG risk management for their overseas operations.
 
Trend 9 Green Finance and ESG Rating Support Green Industries Going Global
 
The 15^th FYP proposes expanding green trade. In recent years, the "new three" (China’s major export drives, namely photovoltaics, batteries, and new energy vehicles) exports all possess green characteristics. The importance of green trade will become increasingly prominent. In October 2025, the Ministry of Commerce issued the Implementation Opinions on Expanding Green Trade, proposing specific measures in four areas: enhancing the green and low-carbon development capacity of foreign trade enterprises; expanding imports and exports of green and low-carbon related products and technologies; fostering a favorable international environment for green trade development; and establishing a sound support and guarantee system for green trade. Green finance will become a booster supporting the "going global" of green products and services. Financial institutions can innovate green financial products and services based on product carbon footprint, low carbon label and certification, etc. The inclusion of green trade in the Catalogue of Supported Projects for Green Finance (2025 Edition) also sends a clear policy signal.
 
International trade requirements on sustainability continue to significantly impact cross-border business. Carbon emissions and labor issues will remain points of contention in trade frictions, with critical minerals continuing to be a hot topic. The already-implemented EU Carbon Border Adjustment Mechanism (CBAM) and the forthcoming Corporate Sustainability Due Diligence Directive (CSDDD) deserve special attention. Besides government-level negotiations, it is important for enterprises to strengthen their own sustainability management, particularly by introducing ESG ratings into supply chain management, which will aid their overseas expansion and financing.
 
Trend 10 AI-Related ESG Risks Materialize as a New Focus for Stewardship
 
New exporting drivers such as artificial intelligence, robotics, and innovative pharmaceuticals create social benefits but also harbor ESG risks. Among them, AI's ESG risks are mainly reflected in four aspects: energy consumption, data privacy, job displacement, and ethical impacts, such as harm to users or surrounding groups. Currently, AI's ESG risks have begun to materialize substantively, with some landmark cases both domestically and internationally involving AI-led layoffs, AI-incited crime, and autonomous vehicle accidents. If mishandled, such risks could lead to huge compensation payouts and brand crises for companies, causing losses for investors. Internationally, major investors have already incorporated AI issues into their stewardship activities, actively engaging with investee companies and forming framework guidelines. Leading domestic institutions are expected to gradually take action, with some early practices emerging.
 
In the AI era, algorithm governance is crucial. Establishing a multi-stakeholder governance system involving government regulation, corporate self-discipline, and social supervision is imperative. Leading technology companies, especially tech companies with ecosystems  should take the lead. They should not only advocate for "Technology for Good" but also for "Algorithms for Good." This includes establishing ethics committee, formulating ethical guidelines and management systems, assessing ethical risks, and implementing contingency measures against ethical risks.