39 ASIAN LEGAL BUSINESS – SEPTEMBER 2023 WWW.LEGALBUSINESSONLINE.COM ratings and data providers. Both the UK and Singapore are also in the process of developing their respective codes of conduct. COMBATING GREENWASHING Japan’s FSA has also put forward a series of guidelines to promote ESG investments while combating greenwashing by investment trust managers (ITMs). The proposed guidelines define the scope of ESG Public Funds and include checkpoints for disclosures and management of ESG Public Funds, noted Tomoko Fuminaga, a partner at Morgan, Lewis & Bockius, and Kyoko Nagano, of counsel of the firm in a note. ESG Public Funds are defined as public investment trust funds that use ESG factors as primary factors to make investment selections and which hold themselves out as such in their summary prospectus. The guidelines require ITMs to disclose specific ESG factors used in investment selection, how such factors are considered, limitations and risks in the investment process, and any ESGrelated stewardship code policies. They also require ongoing disclosures about the actual proportion of investments, performance results, and actions taken under ESG-related stewardship code policies. If an ITM delegates its investment authority, it must conduct due diligence on the delegated manager and disclose any relevant matters. In terms of management, the guidelines require ITMs to ensure it has appropriate resources, such as data and information technology infrastructure and human resources, to monitor investment management following the investment strategies of ESG public funds. If investment management activities are delegated, the ITM should have an appropriate system for due diligence on matters related to strategies, portfolios, reference benchmarks, and ongoing disclosures. The guidelines also require ITMs to conduct due diligence on the internal controls of ESG evaluations and data providers, including their objects, methodology, limitations, and purpose. By Hu Yangxiaoxiao Governments, regulators, and investors in an increasing number of countries have started to recognise the significance of environmental, social, and governance (ESG) factors. As a result, many businesses have integrated ESG standards into their operations and development strategies, and Chinese companies are no exception. 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 firms conducting ESG assessments in domestic investments need to refer to both Chinese and foreign laws, regulations, and guidelines. These include the United Nations Sustainable Development Goals, the Global Reporting Initiative’s Sustainability Reporting Standards, the International Organisation for Standardisation’s Guidance on Social Responsibility, and the Chinese Corporate Social Responsibility Reporting Guidelines. Zhang emphasises the pivotal role of lawyers in ESG assessments conducted by PE/VC firms. Lawyers provide legal advice based on domestic and foreign laws and regulations related to ESG investment, offer optimal solutions according to regulations and standards promulgated by foreign institutions and organisations, assist with documentation management and review, and more. Furthermore, green bonds and other green financial products have seen increased adoption in China in recent years as clients leverage these products to accelerate their transformation. This has become another important service area for ESG lawyers. For example, energy industry clients use green bonds to promote investment in renewable energy projects, while power industry clients utilise such bonds to upgrade facilities or establish green power generation projects. Manufacturers tap into green financial products to advance environmentally friendly transformations in their production processes. Financial institutions actively issue green products to drive green finance development. Advising on such projects requires lawyers to possess knowledge not only of margin trading and securities lending laws and regulations but also of the characteristics of green finance. They must implement effective compliance measures based on each client’s circumstances and design optimal deal structures. The increasing emphasis on ESG factors, both domestically and internationally, has fueled the rapid growth of the first generation of Chinese ESG lawyers. During this process, lawyers have realised the unique requirements they must meet when advising on ESG matters. China: ESG driving increasing legal work