Introduction

Amid growing international consensus on climate action, sustainability has gradually evolved into a mainstream value within the global financial system. As China enters a critical stage of green transition during the 15th Five-Year Plan period and deepens the top-level design of the “Five Key Areas of Finance,” the country is moving into a new phase of high-quality economic and social development.

Government-backed financing guarantee institutions serve as a critical bridge between fiscal policy and financial markets. By directing scarce financial resources, sharing credit risks for small and micro enterprises (SMEs) and rural borrowers, and supporting local economic development, these institutions play an indispensable quasi-public role within China’s financial system.

Against this macro-policy backdrop, establishing ESG disclosure systems tailored to the characteristics of government-backed financing guarantee institutions has become an inherent requirement for fulfilling their policy mandates, implementing the “Five Key Areas of Finance,” strengthening risk management capabilities, and achieving high-quality development.

This article examines the policy context, existing challenges, and potential pathways for ESG disclosure by government-backed financing guarantee institutions in China.

I. The Policy Context for ESG Disclosure by Government-Backed Financing Guarantee Institutions

1. The “Five Key Areas of Finance” Introduce New Functional Requirements

China’s government-backed financing guarantee sector has gradually developed a regulatory framework built upon laws and regulations, specialized policy guidance, and operational management rules.

Since the State Council issued the Regulations on the Supervision and Administration of Financing Guarantee Companies in 2017, the sector has established foundational requirements emphasizing compliant operations, inclusive finance, and systemic risk prevention.

In 2025, six government departments, including the Ministry of Finance, jointly issued the Administrative Measures for the Development of Government-Backed Financing Guarantees, further standardizing institutional operations and strengthening requirements related to serving the real economy. This policy shift reflects the sector’s gradual transition from a traditional “credit enhancement” function toward a broader role encompassing industrial guidance and social governance.

The same year, the General Office of the State Council released the Guiding Opinions on Effectively Advancing the Five Key Areas of Finance, elevating technology finance, green finance, inclusive finance, pension finance, and digital finance to the level of national strategic priorities.

Government-backed financing guarantee institutions are naturally linked to these five strategic areas. Under the policy framework commonly described as “one core with two supporting wings,” guarantee institutions focus on inclusive finance and rural revitalization while channeling financial resources toward underserved sectors through credit enhancement, risk sharing, and fee reduction mechanisms.

2. The Convergence of Green Finance and Inclusive Finance Policies

Green finance policies increasingly require financing guarantee institutions to strengthen their credit enhancement role in supporting low-carbon industries such as clean energy and energy efficiency.

The Green Finance Guidelines for the Banking and Insurance Industries issued in 2022 explicitly required financial institutions to incorporate ESG considerations into full-process risk management systems.

In 2024, the Guiding Opinions on Further Strengthening Financial Support for Green and Low-Carbon Development proposed establishing a comprehensive environmental information disclosure framework to guide social capital toward low-carbon transition.

Meanwhile, the Green Finance Supported Projects Catalogue (2025 Edition) unified standards for defining green financial products, laying the foundation for greater interoperability across financial instruments.

At the same time, inclusive finance policies have provided increasingly operational guidance for government-backed financing guarantee institutions. In 2025, four ministries, including the Ministry of Finance, jointly issued the Guiding Opinions on Further Leveraging the Government-Backed Financing Guarantee System to Support Employment and Entrepreneurship, emphasizing stronger coordination between fiscal policy, financial policy, and employment policy to support labor-intensive SMEs.

3. Sustainability Disclosure Is Becoming Increasingly Mandatory and Standardized

Globally, sustainability disclosure is shifting from a voluntary practice toward mandatory and standardized reporting.

In 2023, the International Sustainability Standards Board (ISSB) released IFRS S1 and IFRS S2, marking a major step toward global harmonization of sustainability disclosure standards.

Subsequently, the European Union adopted the Corporate Sustainability Reporting Directive (CSRD) and the accompanying European Sustainability Reporting Standards (ESRS), requiring qualifying companies to conduct value-chain-level sustainability disclosure.

In China, sustainability disclosure requirements have also accelerated rapidly:

• In April 2024, China’s major stock exchanges issued the Guidelines for Sustainability Reports of Listed Companies (Trial);
• At the end of 2024 and beginning of 2025, the Ministry of Finance successively released the Basic Standard for Corporate Sustainability Disclosure and the Climate Disclosure Standard.

As important components of China’s state-owned financial capital system, government-backed financing guarantee institutions are increasingly expected to standardize ESG disclosure practices—not only for compliance purposes, but also to deepen participation in financial markets and respond proactively to national policy priorities.

II. Key Challenges Facing ESG Disclosure

1. Misalignment Between Generic ESG Frameworks and Quasi-Public Institutional Characteristics

Most mainstream ESG disclosure frameworks—both international and domestic—are designed primarily for listed companies and commercial financial institutions, with an emphasis on financial materiality and investor-oriented stakeholder concerns.

This creates a significant mismatch with government-backed financing guarantee institutions, which are generally smaller in scale, policy-oriented, quasi-public, and non-profit in nature.

Many institutions also face weak digital infrastructure and limited data management capacity. Directly applying disclosure indicators designed for large corporations often results in high compliance costs, inconsistent statistical methodologies, and operational inefficiencies.

More importantly, generic ESG frameworks fail to adequately capture the unique social and policy functions of guarantee institutions, particularly their role in directing financial resources toward inclusive finance, green industries, and technological innovation.

2. Difficulties in Obtaining ESG Data from SMEs and Rural Borrowers

The primary clients of government-backed financing guarantee institutions are SMEs and rural borrowers, many of whom have weak risk resilience, low levels of digitalization, and limited ESG management capacity.

As a result, guarantee institutions face substantial challenges in obtaining standardized underlying data related to environmental emissions, energy consumption, labor conditions, and other ESG indicators.

On one hand, SMEs are often more focused on survival and growth than ESG compliance, lacking both incentives and professional capabilities to establish ESG accounting systems.

On the other hand, fragmented and non-standardized data structures mean that ESG disclosure often remains narrative-based rather than quantitatively robust. In the absence of public data-sharing mechanisms and unified indicator standards, institutions struggle to convert scattered information into comparable ESG reporting outputs.

3. Limited Institutional Capacity for Sustainability Disclosure

At present, most government-backed financing guarantee institutions remain organized around traditional business approval and risk control structures, without comprehensive systems for ESG data collection, disclosure, or sustainability risk assessment.

A shortage of interdisciplinary talent is a major constraint. The sector urgently needs professionals who understand both financial operations and green industry development.

Since most guarantee institutions are non-listed entities and are not yet subject to mandatory disclosure requirements, ESG capacity building often lacks urgency. Meanwhile, limited staffing and institutional resources further increase the difficulty of professional ESG data management.

Compounding the issue is the absence of sector-specific ESG disclosure guidelines tailored to guarantee business models, leading to inconsistent disclosure quality across institutions.

III. Policy Recommendations

1. Develop Sector-Specific ESG Disclosure Guidelines

Regulators and industry associations should develop dedicated ESG disclosure guidelines tailored to the quasi-public and policy-oriented nature of government-backed financing guarantee institutions.

Such guidelines should focus on policy performance and social value creation rather than purely financial materiality.

Key indicators could include:

• Green guarantee coverage ratios;
• Financing support for SMEs and rural borrowers;
• Capital mobilization toward strategic emerging industries;
• Contributions to employment stabilization and financing cost reduction.

A phased disclosure framework—with both “basic disclosure” and “recommended disclosure” requirements—could help institutions gradually strengthen disclosure practices while reducing initial compliance burdens.

2. Focus on Material Sector-Specific ESG Issues

Guarantee institutions should prioritize ESG indicators closely aligned with their core business characteristics.

• Environmental (E): disclose the scale of green guarantee financing, green credit risk-sharing mechanisms, and innovative green finance products;
• Social (S): emphasize inclusive finance outcomes, employment stabilization, rural revitalization, and support for SMEs;
• Governance (G): strengthen disclosure related to risk management effectiveness, compensation ratio controls, anti-corruption mechanisms, and governance stability.

Such disclosures would better reflect the unique policy and social functions of guarantee institutions within China’s financial system.

3. Strengthen Comprehensive Sustainability Capacity Building

Government-backed financing guarantee institutions should use ESG disclosure as an anchor for broader sustainability capacity development.

Key priorities include:

• Building interdisciplinary ESG talent pipelines;
• Strengthening cooperation with think tanks and research institutions;
• Conducting forward-looking research on green inclusive finance and the relationship between environmental performance and credit risk among SMEs;
• Participating in industry standard-setting and data-sharing initiatives.

In addition to improving their own disclosure systems, guarantee institutions can also support regulators and partner banks by providing SME-related ESG data, thereby improving policy targeting and fiscal risk compensation mechanisms.

Conclusion

As China advances high-quality development and green transition, ESG disclosure is becoming increasingly important for government-backed financing guarantee institutions.

However, existing disclosure frameworks remain insufficiently adapted to the sector’s quasi-public and policy-oriented nature. Significant challenges persist in data collection, institutional capacity, and methodological standardization.

Going forward, sector-specific guidelines, materiality-focused disclosure practices, and enhanced sustainability capacity building will be essential to improving disclosure quality and strengthening the sector’s contribution to inclusive and green development.

Author
Yang Chenhui
Research Fellow, International Institute of Green Finance (IIGF), Central University of Finance and Economics