Sustainable investment in China a ‘growing opportunity’ – BSR

Environmental Finance, 26 November 2009 - Investing sustainably in China is possible but growth is being hampered by a number of factors, including a lack of relevant information, according to a report from sustainability consultancy BSR.

Momentum is growing behind sustainable investment, said Zhuo Xin, leader of BSR's financial services practice in China. “The four main drivers are the evolving environmental, social, and governance [ESG] regulatory landscape; the growing awareness of the need for risk management by investors; the increasing – but still limited – amount of third-party information available; and the increasing attention from international sustainable investment initiatives,” he said.

But the report, commissioned by the International Finance Corporation – the private finance arm of the World Bank – notes that “the market currently remains undeveloped”. It identified only one socially responsible investment (SRI) retail fund, Aegon-Industrial Fund Management Co, which had attracted $375 million as of March 2009 and had outperformed its benchmark by 47% from May 2008 to June 2009.

Robeco and Sumitomo Trust & Banking have also announced the launch of SRI products in China, the report added.

Overall, BSR estimates that around $3 billion of assets in domestic mutual funds are invested with consideration of ESG factors.

Shanghai Stock Exchange and China Securities Index this year launched China's first sustainability index, using China-adapted methodologies to select stocks. And, the report says, some Chinese companies have joined the first tier of global companies in corporate social responsibility terms, such as China Mobile, which was included in the 2008 and 2009 Dow Jones Sustainability Index.

However, few private equity firms are considering sustainability, with the report identifying Tsing Capital, a private equity firm focused on clean technology, as a leader in integrating ESG factors in its investments.

Rick Stathers, manager of the SRI team at Schroders Investment Management in London, said SRI investing in emerging markets is made difficult by different levels of disclosure as well as the different legislative regimes under which companies operate. “You have to put more focus on how a company sits against its national peers rather than its international peers,” he said.

BSR gave three main recommendations: the formation of a working group to help define sustainable investment in China; enhancement of ESG disclosure that targets mainstream investors; increasing public education about ESG.

Author Environmental Finance Publication Date 26 Nov 2009 Document Type News articles Issue/Topic Business Role/CSR Energy & Climate Region Asia Country China Source Environmental Finance Include In RSS Business & Sustainable Development News Corporate Social Responsibility News Energy & Climate News