Key challenges facing the SRI indices development in China

Purpose – The purpose of this paper is to map out the soft and hard infrastructures that may have contribute to the SRI indices development in China. As part of the research, the author particularly focuses on the governance, reporting and transparency of corporate sustainability issues in China. Design/methodology/approach – The author reviewed literature, new articles, research reports and documents of the two stock exchanges, Shanghai Stock Exchange and Shenzhen Stock Exchange, in China, to understand the current SRI development and the challenges and opportunities for SRI indices in the market. Findings – The major findings from this paper are four‐fold. First, as the government's influence in the market is still substantial, government leadership in promoting corporate sustainability and SRI is essential in China. Second, with the stock exchanges already taking a proactive role in corporate sustainability with the stringent listing regulations, they are the natural facilitators in having SRI indices and promoting corporate sustainability in the market. Third, the lack of transparency in China is a barrier for SRI development. While there are positive developments on corporate disclosure, “how much information the corporations are willing to disclose” or “whether they disclose the information you ask for” are the two key questions. And fourth, there are lots of interests from globalised SRI investors in China. Currently, majority of SRI investment in emerging markets (including China) is from globalised SRI investors. This trend will continue as the size of local SRI investors in emerging markets is still relatively small. Originality/value – The paper highlights the current development of SRI in China and identifies the issues that contribute or hinder the development of SRI and SRI indices in the market. The analysis of the SRI development in China can shed some lights to the current research on SRI and SRI indices, which have largely focused on developed markets. With the rapid economic growth in emerging markets (especially China), the development in these markets could not be neglected. Furthermore, this paper will enhance global SRI investors' understandings on SRI in China.