The 5th China SIF (China Social Investment Forum) Annual Conference was held in Beijing on 5th December 2017. Since 2012, this event has aimed to promote the concept of responsible investment, encourage green finance and facilitate the sustainable development of China’s capital market.
“…this event drew significant attention from capital markets in China & around the world”
The theme of this year’s conference was “World Trends and China’s Practices”. Jointly hosted by SynTao Green Finance, Green Finance Committee of China Society for Finance and Banking, and Caixin Media and co-hosted by UN Sustainable Stock Exchange initiative and Principles for Responsible Investment (PRI), this event drew significant attention from capital markets in China and around the world. Although there were many other advances made, below are 3 main takeaways from the event:
1. ESG investment with Chinese characteristics is growing
One consensus from the conference was that ESG investment in China is making significant progress, and this was highlighted by Dr Ma Jun, chairman of the Green Finance Committee of China Society for Finance and Banking, in his opening speech.
He noted that in recent years, China has made rapid progress in green finance, and has become a global pioneer in policy architecture, local pilot programs, green bonds, green industry funds, environmental stress testing and green assurance.
However, he also emphasised that Chinese institutional investors, including asset managers, have started late in green finance compared to international peers. In order to catch up and improve the green finance market in China, Dr Ma made several suggestions:
- complete a mandatory environmental information disclosure mechanism for listed companies;
- promote the notion that green investment can improve long-term returns;
- state-owned long-term investors should take the lead in green investment;
- encourage the research and development of green financial instruments;
- support third-party assurance and rating agencies;
- build capacity for environmental risk analysis;
- encourage domestic institutional investors to disclose environmental information;
- And adopt principles for responsible investment.
According to Dr Ma Jun, China has made rapid progress in green finance…
…& has become a global pioneer in policy architecture, local pilot programs, environmental stress testing & more
Seperately, Liu Chuankui, Vice Secretary General of Insurance Asset Management Association of China, gave a few examples of growing ESG investment in China.
He showed that insurance funds, through equity, bond and other instruments, are investing in projects ranging from the national Belt and Road Initiative, to infrastructure construction projects, to civil projects in senior citizens’ care, to community renovation and regeneration and more.
Insurance funds can provide an important source of green finance for the economy
Clearly, insurance funds can provide an important source of green finance for the economy. In the near future, insurance funds are expected to maintain responsible investment focusing on social well-being, supply-side reform, and the optimisation of assets allocation.
2. Launch of the SGCX ESG50 Index
As interest in ESG investment grew, major institutional investors have increasingly adopted ESG factors in their decision-making and market analysis. In September 2017, SynTao Green Finance, a leading Chinese consultancy for responsible investment cooperated with Caixin Media, one of the most trusted source of financial and business news and information services in China, and released the “Landsea· China ESG Development Index”.
SynTao Green Finance & Caixin in Dec 2017 published the SGCX ESG50 Index…
…the first equity index incorporating ESG performances of listed co’s in the mainland Chinese market
Three months later in December 2017, SynTao Green Finance and Caixin came together again and published the SynTaoGF–CaiXin ESG 50 Index (SGCX ESG50 Index), the first equity index incorporating ESG performances of listed companies in the mainland Chinese market.
In order to quantify the ESG performances of listed companies, SynTao Green Finance developed an ESG indicator system that refers to international and domestic standards according to information disclosure level in the Chinese market. Companies’ ESG performances were quantified and evaluated through publicly available information and calculated into user-friendly ratings for investors to easily incorporate into their practice.
The universe of SGCX ESG 50 Index is CSI 300 index, one of the most commonly used equity index in the Chinese market. At the launching ceremony, 50 constituent stocks were presented with certificates as companies with the best ESG performances in Chinese stock market. These companies deserve more attention from investors for they have potential for long-term sustainable growth.
In the context of the speedy development of China’s economy and society, it’s important to measure ESG performances, which are also connected to companies’ long-term financial returns. The SGCX ESG50 Index is an essential tool for this measurement.
3. Fostering dialogue between practitioners and researchers
It was encouraging to see the sharing of knowledge between those who advocate information disclosure and those who implement such strategies. In the afternoon sessions of the conference, domestic and international practitioners and researchers joined in the four panel discussions.
|Panel Discussions at the 5th China SIF Conference
On one side, practitioners introduced various innovations such as national strategies in Indonesia for sustainable finance innovation and new regulations of stock exchanges in the world regarding ESG disclosure. On the other side, researchers analysed ESG reports of the companies listed in Shanghai and discussed methods to improve ESG information disclosure for listed companies. The gathering of stakeholders from different backgrounds was also significant, with representatives from law firms, stock exchanges, think tanks and businesses.
Looking ahead, continued dialogue between these various stakeholders will be essential for the growth of China’s green finance market.
Looking ahead, continued dialogue between various stakeholders will be essential for the growth of China’s green finance market
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