I was thrilled to spend ten days in China last month; in many ways the trip of a lifetime. We had been preparing to host an event in Shenzhen in November 2018 as part of the Sustainable Finance Institute a few of us launched in March this year for this purpose. The Sustainable Finance Institute is bringing badly needed training to global areas that need it on ESG, helps advise on projects and frameworks, and hosts events in China and elsewhere. In the end, our event in Shenzhen was held at Peking University HSBC Business School on January 8-9, 2019. It featured leading speakers such as Chang Sun, who heads TPG Asia and works on the their TPG Rise impact fund, which uses sophisticated metrics for measuring positive impact alongside financial returns – exactly what our books have been calling for over the past ten plus years. Charles Yonts, one of Asia’s leading ESG researchers, working at Hong Kong-based bank, CLSA, gave a spirited talk focused on the governance imperative for investors focused on the region. East Capital’s Karine Hirn and Francois Perrin provided an excellent presentation on the importance of engaging with and getting to know those same companies. Locating the event in Shenzhen was ideal. It is convenient for Hong Kong, and many experts live and work there. It also benefitted from being a positively focused event in China itself, which allowed those in the country to join from cities such as Beijing and Shanghai, as well as from the rest of Guangdong province. Shenzhen is a beacon of entrepreneurial energy, having been a small village only a few decades ago. Deng Xiaoping designated it as the first special economic zone. The city has boomed since and has become a place for many young people looking to start businesses and often impact focused ones.The event was a success. We had 350 people show up for day one, which included an entertaining cocktail reception hosted by the agriculturally rich Municipal Region of Bayannur in Inner Mongolia, which is on the environmentally critical Yellow River, not far from Beijing, and which is seeking to issue green bonds for bioenergy and industrial ecology. On the second day, I underlined my views that we have had the ESG conversation backwards. It isn’t “create an ESG database and then figure what to do with it.” Rather, we need investment strategies that work that can be demonstrated to deliver the outcomes we seek both from a sustainability and financial standpoint, and then scale these strategies through asset owner commitments, which create the necessary supply-demand dynamic for purpose. We can then use data to see how we are doing at the strategy level (including corporate strategies) and at the system level (where we can also then figure out best policy to apply). The programme featured successful case study strategies that can scaled for purpose. You can see a breakdown of these at our Sustainable Finance Institute website. China needs to be experienced by all practitioners in our field. You need to breath the bad air yourself to believe it! You need to experience the friendly and kind people, the excellent food and the entrepreneurial spirit operating at every level of the economy of amazing cities such as Shanghai. China over the past 40 years has changed faster than any nation on Earth, and is determined to get on with it.
The Green Finance Committee is innovating on policy faster than any political body. Watch global leader Dr. Ma Jun’s video to PRI in Person to see what leadership looks like. It was an honor to participate in the recent UK-China Green Finance Taskforce report entitled:
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“Delivering a Greener Tomorrow,” which featured sections on Greening the Belt and Road Initiative and on corporate disclosure as well as ESG practice. China is moving to mandatory reporting in 2020, something no other country has done. It is setting green bond incentives and pollution pricing mechanisms that are enabling it to begin its necessary transition away from coal. Don’t let George Soros dissuade you (you are going to have a very hard time convincing me the US and UK don’t also have databases on everyone) or articles on China’s “slowing economy.” China has a rapidly maturing economy which means it will grow more slowly by definition. But it is moving on innovation. As Steve Schwartzman, the Blackstone chief, said at Davos, China is ahead on AI and innovating rapidly. Per Bloomberg New Energy Finance, four of the top five Renewable Energy PE/VC deals in 2018 involved Chinese companies and new technology.China is in the mix of leading innovative nations, something which compels any global investor to pay attention if not invest. A leading Chinese Science and Technology university has invented a translation device which if you speak into it in English, it speaks back Chinese and vice versa. This version two of the technology looks like an iPhone. In 2020, a clip on version is expected which you can wear on your lapel. With 5G forthcoming, translation will be nearly instantaneous. A world in which you can speak with anyone is a better place as far as I’m concerned. For all the fits and starts of globalization being experienced lately, the world in many ways continues to become one place. That seems like a fair and balanced outcome to me. If that is where we are heading, China – soon to become the world’s largest economy, most predict – needs to be clearly on your radar.