As the Chinese Government Flexes its Regulatory Muscles, What Are the Implications for Investors?

Below is an excerpt from ISS Securities Class Action Services’ recently released paper “As the Chinese Government Flexes its Regulatory Muscles, what are the Implications for Investors?” The full paper is available for download from the Institutional Shareholder Services (ISS) online library.

KEY TAKEAWAYS

• The Chinese government is tightening its regulatory hold on the country’s society and economy.
• This has disclosure implications for Chinese companies who issue American Depository Receipts (ADRs).
• The impact of new Chinese government regulations is driving a wave of shareholder class actions against Chinese ADR companies that may not have disclosed appropriately the potential consequences of these regulations.
• Increased regulations in China also have implications for ESG-motivated investors, with an increase in concerns around human rights and labor issues.
• Securities class actions and norms-based controversies are two very different data sets, but both are showing growth in the number of results associated with increased regulatory action in China.
• As climate change and other ESG factors drive a heightened focus on stewardship practices among investors, this paper identifies an opportunity for new insights to be generated by the examination of differing data sets.

US-Based Shareholder Class Action Complaints
Chinese-Headquartered Companies

*Through October 1, 2021

Explore ISS ESG solutions mentioned in this report:

• Maximize your fund’s recoveries while minimizing costs using ISS Securities Class Action Services.
• Assess companies’ adherence to international norms on human rights, labor standards, environmental protection and anti-corruption using ISS ESG Norm-Based Research.
• Watch ISS ESG’s Modern Slavery and Responsible Investment Webinar Series, including a session with Professor James Cockayne, author of the University of Nottingham research on Xinjiang economic measures.