This month the China Social Investment Forum (China SIF) held its fourth annual conference focused on the country’s major push on green finance. Responsible Investor speaks with Dr. Peiyuan Guo, General Manager at sustainability consulting firm SynTao Green Finance about the highlights from the event, including Dr Ma Jun, Chief Economist at the People’s Bank of China’s, views on fiduciary duty and China’s stock exchanges thinking around transparency.
Q: The focus of the conference last year was the UN Sustainable Stock Exchange Initiative. What was the focus of the conference this year?
I think the uniqueness of this year’s conference is focusing on the investors. Over the past few years we’ve seen green finance product innovation, for example green bonds. But it’s not just a matter of supply, it’s also a matter of demand. Many people are saying you need to push investors to look at this issue, so we decided that for this conference we would put investors as the focus.
Q: Who was involved with the event?
We had around 250 people attend from the financial sector, companies interested in issuing green bonds, NGOs and research firms. And we had seven co-hosts: China’s Green Finance Committee, National Association of Financial Market Institutional Investors, SynTao Green Finance, China Financial Information Network, the UN Sustainable Stock Exchanges Initiative, the PRI and the Insurance Asset Management Association of China.
Q: There were opening speeches from each co-host at the event. What interesting topics came up?
Cao Deyun [Executive Vice President and Secretary General of Insurance Asset Management Association of China] gave an opening remark saying we need to consider environmental factors in insurance asset management.
Dr Ma Jun [Chief Economist, Research Bureau, People’s Bank of China] in his speech clearly emphasised the importance of the role of investors for green finance. He gave five suggestions for investors in China. Some of them included awareness-raising and capacity building. They need to get more tools and strategies for integrating ESG and environmental considerations into their investment processes. He also indicated that green investors needed to have an engagement approach to fulfil their fiduciary duty and engage with the boards of listed companies or investee companies. The last comment he made is that he wants to make clear the importance of transparency and information disclosure of listed companies, including green ratings, to help investors make smarter decisions.
Q: Earlier this year the Hong Kong Stock Exchange brought in requirements for listed companies to disclose a range of ESG factors on a ‘comply or explain basis’. Did the Shanghai Stock Exchange and Shenzhen Stock Exchange, who were in attendance at the event, indicate they may do something similar?
The Shanghai Stock Exchange, the Shenzhen Stock Exchange and the London Stock Exchange joined together in a session on disclosure. They all emphasised the importance of transparency. Shanghai Stock Exchange and the Shenzhen Stock Exchange noted that the number of reports is increasing but the quality of reports still needs improving. Therefore both of them are thinking about how to further improve their regulation on transparency issues. None of them indicated a clear time plan, but at least they realise the importance and are keen to further promote a more material and comprehensive information disclosure.Q: Was the event focused on China’s domestic investors or international ones too?
We wanted a domestic focus but it is still quite early in China for green finance. Therefore we decided to bring in global investors with practical experience sharing. In the morning we only had one domestic investor sharing from a local mutual fund – the Aegon-Industrial Fund. Aegon is the Dutch insurance company and they have a joint venture mutual fund in Shanghai. This mutual fund launched the first responsible investment fund in China in 2008. We had the fund manager [Yang Yuebin] explain how he managed the fund [AIFMC Green Investment Hybrid Securities Investment Fund] and how it considered environmental factors.
Q: Dr. An Guojun, Deputy Secretary General of China central bank’s Green Finance Committee, spoke about the development of a green fund in China. What did she say?
Dr. An Guojon introduced a green private equity fund. In China, some private equity funds are a public-private partnership between private capital and state-owned capital. Right now across China there are several regional-level funds that want to invest for a green purpose and make money.
Q: What topics of interests came from the audience?
Interesting things that people asked during the Q&A session is whether green will have to sacrifice financial performance. This is a typical question when you first go green – and I think this is indicating that this is in the early stage. Many people, especially from the investment side, are not convinced whether green means money or whether green is profitable.
Q: What could help to tackle this perception?
We need to tell more good stories in China to demonstrate that investing in green doesn’t mean you have to be a nice person with no profit or no margin. Investing in green could also create a profitable business and financial success. The other issue is how we should balance short term and long term, because most of the environmental funds can win in the long term, but if we take at look at the short term perhaps it’s not the case. This also reflects the nature of the investment community in China – if we want to promote green investment in China, we need to identify the long-term capital. Everybody just looks at one-year returns and it might be too difficult for them to look at green investment.
Q: Were there any other hot topics at the event?
We had a specific section on quantifying and managing ESG risk and panel was very attractive to the audience. Most of them want to know how to measure this new risk. For them it’s not a traditional risk. They need tools and support on how to deal with water-related risk, air-related risk and energy-related risk. This is echoed by Dr. Ma Jun, who had said investors need tools to do green finance.
Q: Any final thoughts on the conference and the issue of green finance in China?
We still need an awareness-raising campaign. We need to encourage the asset manager fund association to do more events, and of course China SIF can. But the situation is improving. The fund manager from China’s first responsible investment fund [Yang Yuebin, fund manager, Aegon-Industrial Fund] said a few years ago he felt alone but now he feels there is a group and he is not the only one.