Feb. 26, 2008 - The Chinese government has followed through on plans to require that publicly held companies release information on environmental risk before they can sell new shares. The new regulation, called the first step in establishing a Chinese "green securities policy," also stipulates that highly polluting companies must pass environmental inspections when applying for an initial public offering or refinancing.

In reporting on environmental risks, companies "should specify which new environmental protection laws, regulations and policies could affect [them, and the] possible penalties for violations and major projects that could affect the environment," according to a statement released by China's State Environmental Protection Administration (SEPA). If a company must stop production, relocate, or close, and their major assets face being frozen due to environmental protection problems, it must also let the public know.

"The rules are necessary because some enterprises might use publicly raised funds to expand production at heavily polluting plants and might fail to fulfill commitments to invest in environmental protection," says SEPA vice director Pan Yue. "Such actions would expose investors to risk if the government continued tightening pollution and energy conservation policies."

The new regulation specifically targets companies in energy-intensive sectors such as power generation, coal, textiles, paper and steel, cement, and aluminum production.

China recently introduced two other green policies - one for insurance, one for credit - in a bid to solve severe environmental problems through economic measures. The "green insurance system," currently in a pilot phase, requires that all industries with pollution risks be insured against claims from victims of environmental accidents. The "green credit policy," launched in July, instructs banks to restrict lending to energy-intensive, polluting industries.