I. What are NGOs and ESG?
NGOs and ESG are two hot topics these days. An NGO refers to a non-governmental organization. In 2017, China promulgated the Law on Administration of Domestic Activities of Overseas NGOs in China, which opened a new era for international NGOs with respect to their activities in the country. ESG is an abbreviation of Environmental, Social and Governance criteria, which is a set of investment philosophies and evaluation criteria focused on how a company manages its relations with respect to the environment, society and governance, rather than its financial performance.
II. What is the relation between NGOs and ESG?
In general, NGOs play a crucial role in building ESG theories and criteria. They set the business agenda for not only the environment and sustainability, but also for human, labor and animal rights, and even corporate governance.
By constantly engaging with banks, insurers and other investors and applying pressure on leading corporations and institutions to acknowledge the social and environmental consequences of funding decisions, NGOs have ensured that institutional investment policies have evolved in step with their concerns. Without NGOs, today’s mainstream acceptance of ESG would probably never have happened.
For example, Wild Aid promotes the now well-known slogan “No Trading, No Killing” and Earth Hour is a global energy saving movement launched by the WWF (World Wildlife Fund) to address global climate change. There are now many reputable ESG rating agencies in the financial investment sector, such as CDP.
III. NGOs and ESG in China
The Chinese government welcomes international NGOs. In the Letter of Congratulations to Civil Society 20 China 2016 (C20), President Xi Jinping pointed out that civil society plays a crucial role in promoting economic and social development by attracting more citizens to participate in public affairs; the Chinese government would spare no efforts in supporting overseas NGOs to conduct friendly exchanges in China, providing convenience for NGOs’ activities, and protecting their legal interests.
In practice, NGOs that focus on ESG matters are also encouraged. For example, the above mentioned WildAid and WWF have set up their China representative offices in accordance with the Law on Administration of Domestic Activities of Overseas NGOs in China. Greenpeace, a global environment protection organization, carries out its activities in China by means of temporary activity filings. We believe that, with the increasing awareness of ESG in China, more and more international NGOs will come to China.
In addition to the registration and filing requirements, international NGOs shall abide by China’s local laws and regulations, which can be particularly sensitive and complicated in the area of ESG. For example, the 2021 cotton incident undertaken by the Swiss-based Better Cotton Initiative (BCI) faced a barrage of complaints in China. Therefore, international NGOs should pay special attention to Chinese local compliance and customary rules, in order to win acceptance from the Chinese community and further enhance their global reputation.
JunHe’s NGO and ESG Practice:
JunHe is among the largest internationally recognized law firms in China to provide a full spectrum of quality legal services, with a team of more than 900 professionals. We are pioneers in the NGO and ESG practice areas in China and provide reliable and practical legal advice to our valued clients.
For further information, please contact:
ZHU, He (George), Partner, JunHe
zhuh@junhe.com
