September 23rd, 2017, SynTao Green Finance and Aegon-Industrial Fund Management co-launched the Decennial Report on Responsible Investment in China.
Over 70% of investors knows about responsible investment
Guo Peiyuan, Chairman of SynTao Green Finance, says that responsible investment in China has emerged in the past decade. An increasing number of asset managers and investors are learning about the value of responsible investment. CNY50.02 billion in aggregate net asset value is put into practice by responsible investment mutual funds in domestic market as of August 2017.
Guo Peiyuan, Chairman of SynTao Green Finance
The Decennial Report on Responsible Investment in China published the result of an online survey towards the domestic individual investors conducted by SynTao Green Finance, Caixin Media and Aegon-Industrial Fund Management. The survey observes that over 70% respondents know about concepts of responsible investment and corporate social responsibility. Survey also shows no sacrifice on financial return is an important precondition for people to consider social responsibility. When asked “do you consider ESG factors in investment decisions”, 31.3% respondents signaled a neutral stance that they would consider if financial return of their investment is not affected. 27.6% would consider ESG if could increase the return. 20.6% and 13.7% respectively would always consider, or consider even financial return is slightly compromised. Among all demographic groups, men age between 40-55 holding Master’s Degree or above are most likely to consider responsible investment.
Globally, ESG factors have been adopted by institutional investors including pension funds, insurance companies, foundations, etc. in order to reduce risk exposure and to increase long-term return. ESG factors will grow in importance in the Chinese market, which is geared towards international standards. Starting from June 2018, MSCI will include some China A Large Cap stocks in its Emerging Markets Index and ACWI Index. Companies included will be assigned ESG rating.
From 0 to 50 Billion
Mutual funds adopting responsible investment principles in mainland China has started from almost zero 10 years ago. Promoted by top-down policy incentives from the central government, responsible investment, especially green finance has grown fast in recent years. As of August 31st, 2017, 62 mutual funds in mainland Chinese market has adopted responsible investment principles by examining companies' CSR performances, or by investing in the green themes of low- carbon economy, environmental treatment, new energy, etc.
26 responsible investment mutual funds had been launched for more than three years, with an average duration of 6.5 years since inception. Compared to funds of the same category, those funds are on average among the top 19.6% and 42.1% for 3 year and 1 year return.
There are currently 30 equity indices related to responsible investment in the Chinese market that examine companies' CSR performances or focus on the green themes. For 3-year performance, 12 indices that examine companies' CSR performance outperformed the indices representing their universes in Sharpe ratio (10/12), volatility (9/12) and average return (11/12).
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The performance of these mutual funds and indices demonstrate that in the Chinese market, responsible investment can help improve financial returns.
The Future for Responsible Investment
The survey observes that the public has high expectation for information disclosure and communication especially by the government. Most preferred channels for CSR information are by the order from regulatory bodies' disclosure, press release and corporate disclosure, etc.
Currently, the most active regions in responsible investment are Europe, the United States, and Canada. Respectively 53%, 22%, and 38% of the professionally managed assets in those regions has incorporated ESG factors. For China, responsible investment mutual funds have big protentional to scale, as currently their aggregated net asset value only accounts for 0.47% of all mutual funds in the domestic market.
Zhu Qigui, Secretary of the Party Committee at Shanghai Advanced Institute of Finance; and Yang Weidong, VP at Aegon-Industrial Fund made speeches. During the roundtable discussion, participants discussed how to balance the financial return and social benefits, the scale of responsible investment, why responsible investment is able to outperform the market, and what are the available targets for responsible investment, etc.
Please click here to download the report