More ESG proposals ahead for China’s AGM season

May 30th, 2024

New reforms to China’s company law will lead to an increase in ESG proposals at AGMs, Allianz Global Investors (Allianz GI) predicted.

A revision to China’s company law will reduce the minimum ownership requirement for shareholders seeking to put forward resolutions at AGMs from 3 per cent to 1 per cent from July 1, South China Morning Post reported.

Allianz GI stewardship analyst Chris Liu Jianyuan predicted this would lead to an increase in ESG resolutions in the 2025 AGM season, as the 2024 season ends in June, just before the revised rules will come into effect.

However, the new law also allows a board to reject resolutions it deems to be outside the remit of a shareholder meeting.

Liu said fewer than 5 per cent of the 10,515 proposals at mainland-listed firms' shareholder meetings, in which Allianz GI took part, were initiated by shareholders. Most were initiated by controlling shareholders for the election and removal of board directors.

Liu told The Post the reforms are aimed at attracting more foreign investment and improving the capital efficiency of state-owned enterprises.

Allianz GI analysts noted in March that companies in China would require a customised stewardship approach combining engagement and proxy voting to enable minority shareholders to influence sustainability agendas, which are typically dominated by management and significant shareholders.

The new laws in China follow a similar move in Japan, where the government published a new policy plan to position the country as a leading asset management centre, including corporate governance reforms, in December.

In February, China’s major stock markets announced their sustainability reporting guidelines, which included mandatory disclosure requirements from 2026 and include a double materiality approach.