28 ASIAN LEGAL BUSINESS CHINA • 亚洲法律杂志-中国版 JULY 2023 low-carbon economy, energy conservation and emission reduction, labour rights, cultural respect, transparency and disclosure, stakeholder communication, environmental indicators, social performance, governance structures, and more. VITAL ROLE OF LAWYERS Chinese companies facing ESG challenges in overseas investments are not left unsupported. Chinese ESG lawyers, who have gained experience over the years, are well-equipped to provide bespoke services in a diverse and complex cultural and regulatory environment. Chen states, “DeHeng’s crossborder team has accumulated rich experience in helping clients deal with ESG challenges and can provide targeted legal services and advice.” Chen shares a memorable deal where the DeHeng team assisted a Chinese company in acquiring a Canadian mining company overseas. Mining companies in Canada often establish agreements with local indigenous populations in mining areas. These agreements involve sharing project rights and interests, compensating the indigenous population, providing employment and training opportunities, and prioritizing indigenous communities for transportation and auxiliary services. Indigenous communities may also have the right to review mining companies’ applications for certificates and permits, proposing solutions to mitigate environmental impact. During this project, the client faced water shortage issues. The mining company proposed short-term, midterm, and long-term plans and engaged in extensive consultations with regulatory authorities, indigenous communities, and other stakeholders. Regulatory authorities primarily focused on the plan’s impact on natural resources, wildlife habitats, and aboriginal rights when approving the long-term water withdrawal plan. Therefore, the views of the aboriginal residents played a crucial role. By conducting in-depth analyses of local ESG issues, the DeHeng team successfully identified and assessed relevant risks, proposed feasible risk mitigation measures, and facilitated the smooth progress of the deal. Cross-border investment is one of JT&N’s traditional strengths. Over the past few decades, the firm has advised large state-owned and private enterprises, including China Communications Construction Company, China Railway Construction Corporation, and China Energy Engineering Corporation, in numerous overseas investment and M&A projects. He and Zheng have witnessed the increasing importance of ESG compliance in overseas investments by Chinese enterprises. As their key client, Hesteel Group Company, expanded globally, it reinforced its ESG compliance requirements after investment. He and Zheng highlight how Hesteel Group has transitioned to “green steel,” focusing on environmentally-friendly production and low-carbon products. This involves seeking green and lowcarbon steel raw materials, establishing joint ventures for scrap steel processing, and building an integrated platform for scrap steel processing and utilization. Hesteel Group aims to reduce the carbon footprint of the global steel industry. With the growing importance of ESG factors, the role of lawyers in serving ESG-related needs is becoming more prominent. He and Zheng state that lawyers can provide enterprises with ESG-specific due diligence for crossborder deals, ESG compliance advisory services for daily operations, and assistance in ESG compliance system construction and related litigation. Chen adds that Chinese lawyers’ ESG services are becoming more systematic. They offer professional legal advice and feasibility analysis to help clients develop investment strategies and implementation plans that meet ESG requirements. Lawyers can assess potential ESG risks and compliance issues, assist in social communication and governance structure building, and provide solutions. They can also help companies establish risk management frameworks, support sustainable development strategic planning, and ensure compliance with best ESG practices and international standards. In addition to these specific services, He and Zheng note that law firms and the legal industry can play a role in formulating ESG evaluation standards. For example, Freshfields Bruckhaus Deringer has been appointed to review the ESG situations of large companies worldwide and develop a more reasonable and clearer ESG governance framework. This demonstrates how law firms can contribute to the development of ESG evaluation standards. DOMESTIC FOCUS ESG factors are increasingly considered in domestic investments due to the ESG wave and China’s carbon peaking and carbon neutrality goals. Zhang Nei, senior partner at Co-effort Law Firm, states that private equity (PE) and venture capital (VC) firms in China are incorporating ESG considerations into their investments. ESG investment aligns with China’s green development philosophy, which aims to achieve carbon peaking by 2030 and carbon neutrality by 2060. Comprehensive ESG assessments are gaining greater attention from investors. ESG investments in China are booming in key areas such as new energy (renewable energy, smart grids, wind power), green transportation (electric vehicles, charging infrastructure), agricultural improvement (innovation and capacity increase), and new infrastructure (green construction). PE/VC “The tightening of ESG regulations is a global trend. Therefore, with a significant amount of overseas investment, Chinese companies face frequent ESG challenges as they expand abroad.” — He Guoliang, Zheng Huan, Jincheng Tongda & Neal ESG