China launches SFDR-style disclosure rules for sustainability funds

Asset managers in China need to back up their sustainability claims under new inaugural disclosure guidelines . The new rules – introduced by the Asset Management Association of China, a self-regulating trade body for the industry – aim to provide investors with clearer information on how sustainability-labelled funds are meeting their investment objectives and performance benchmarks. The guidelines kicked in on 12 June, with a one-year transition period. Experts expect the guidelines to push China’s sustainability reporting regime closer to international standards by requiring clearer alignment between a fund’s stated strategies and its underlying assets. As of June 2025, China has 372 green funds with total assets under management (AUM) of RMB 301.38 bn (US$44.34bn). In a research note, Guo Peiyuan, chair of Chinese sustainable finance consultancy SynTao Green Finance, characterised the guidelines as the “Chinese version of Sustainable Finance Disclosure Regulation (SFDR)” – referencing the set of landmark rules introduced by the EU in 2019 mandating greater transparency for green investment funds. Strengthening climate disclosures Under China's framework, sustainability-focused managers need dedicated environmental, social and governance (ESG) research teams to construct relevant indicators and evaluation criteria to assess the performance of their funds. The criteria will be reviewed at least once a year. The guidelines recognise three types of sustainable investing strategies: negative screening, positive screening and integrated investment. Negative screening excludes assets that cause environmental or social harm, while positive screening selects companies that possess higher ESG ratings than their peers. In contrast, an integrated investment approach factors in sustainability-related indicators into traditional financial risk analysis. “The new sustainable fund guidelines are significant in so far as they aim to reduce green-laundering risks of Chinese funds,” Christoph Nedopil Wang, a professor at the University of Queensland Business School, told Green Central Banking. Wang said that the guidelines sit within a broader strengthening of climate disclosure requirements in China’s capital markets to make asset screening easier for fund managers. Recent issues in the securities market , where various funds that had “green” or “carbon neutrality” in their names but did not have the corresponding investments, may have also prompted the latest developments, he added. For instance, Guotou Ruiyin Beautiful China Fund and the Huatai Zijin Carbon Neutrality Fund both held Baofeng Energy, a company that received multiple environmental fines in 2025 for pollution and permit violations. “At the same time, one of China’s main economic development trajectories remains its green economy that requires more financial investment,” said Wang. SFDR comparisons Compared to SFDR, the new guidelines are less stringent and mostly clarify existing requirements, given that companies with name mismatches had been fined previously, said Wang. “The SFDR requires more stringent disclosures of screening standards, disclosures of remuneration of fund managers, and also specifies risks of shortcomings,” he said. Guo also noted that China’s rules make no distinction between Article 8 and 9 products – funds that “significantly contribute to sustainable objectives” and those that “promote social and environmental characteristics” respectively. The guidelines instead differentiate funds that “primarily apply” versus “include” sustainable investment strategies. Funds that primarily employ sustainable investment strategies – which the framework defines as those carrying names like “ESG”, “sustainable investment" or “responsible investment” – will be required to apply an integrated investment approach, on top of negative or positive screening. These funds will need to strictly align at least 80% of their non-cash assets with their stated ESG strategies. Investing in green and low-carbon industries already supported by national policies or labelled bonds, for instance, will be taken as a form of positive screening – rather than integrated investment. Additionally, funds primarily making sustainability investments will need to establish performance benchmarks that reflect their sustainability strategies. Industry allocation constraints will also need to be developed to avoid the benchmarks from becoming concentrated in a few specific sectors. Requirements are slightly more relaxed for other sustainability-related funds, which only need to minimally apply one of the three sustainable investing strategies. They are also not subject to the 80% coverage or performance benchmark requirements. Guo said that China’s guidelines do not require the disclosure of principal adverse impacts – which are a core disclosure feature under SFDR for certain financial market participants – nor the broader disclosure of potentially harmful effects of certain investments. However, he remarked that such differences are “reasonable.” “Every market situation is different, and the guidelines are sufficient as long as they are sustainable for the current Chinese market. More requirements can be added in the future as the market develops.” China took top place in the latest Asia Green Central Banking Scorecard . 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