Report Launch | White Paper on ESG Development and Innovation in China 2021

Weihua Ma, Executive Chairman of CASVI pointed out that the White Paper explores the current situation and characteristics of China's ESG development from policy to market, from concept to practice, from practical cases to evaluation standards, and it also outlines a clear picture of China's ESG practice for all stakeholders. The White Paper provides representative references for promoting China's sustainable development.

Weihua Ma stressed in the White Paper, "China, as the world's largest growth market and the most promising major investment destination, is facing more severe challenges and assumes greater responsibilities in promoting a fair global governance system." Since China's sustainable finance policy becomes increasingly clear, Chinese financial insitutions and enterprises have to constrain its unsustainable business behavior.

Yimei Li, General manager of China AMC pointed out in the White Paper that China, as the second-largest economy and the largest contributor to global economic growth, shoulders a big nation responsibility. Since Chinese asset management institutions already have an in-depth understanding of the Chinese market and Chinese enterprises, they should have a sense of mission to provide Chinese wisdom and Chinese solutions to global problems. To achieve this, China AMC needs a lot of solid and forward-looking research. Institutions should keep up with the forefront concepts of international ESG investment while maintaining awareness of domestic problems by thinking about the fundamental cause of these issues.

She added, to find out the answers to these problems, stakeholders need to trace back to the roots. They should carefully sort out the origin and development context of foreign ESG investment ideas, understand the different concepts, and put them into the Chinese context. This is also the starting point of the White Paper.

The White Paper is divided into four chapters: the ESG Focus on Worldwise Sustainable Development, the Governance Practice of China's Sustainable Financial Policies, the ESG Innovation Practice of China's Financial Institutions, and the Integration of ESG Management of Chinese Listed Companies. The first and second chapters focus on the origin background of global ESG development and the green financial policy framework built by China in the recent decades. The third and fourth chapters explore the current situation of China's ESG market by taking the well-performed financial institutions and A-share listed companies as the object.

ESG Focus on Worldwise Sustainable Development

The White Paper points out that the proposal of ESG is consistent with the demands of all stakeholders in global sustainable development. The newly emerged development methods and tools have gradually formed a new ESG investment ecosystem, such as changes in corporate values, non-financial information disclosure, investment strategies and methods, performance evaluation standards, and financial product innovation.

The White Paper shows that UN and other international organizations have provided a platform for global financial institutions and entities to carry out ESG practice. Some countries have successively issued ESG related policies and regulations to support the realization of their sustainable development goals and enhance the stability of their financial systems. With the joint promotion of international organizations, government authorities, regulatory authorities, and local stock exchanges, the non-financial information disclosure standards have been continuously improved, and the disclosure requirements have been increasingly strict, strengthening the basic policy support for the sustainable financial system. Moreover, the international ESG rating industry has also formed a competition pattern led by large professional service institutions. ESG evaluation standards began to have diverse types, and rating data and supporting solutions are constantly coming out. The global ESG practice has gradually become standard, systematic, and localized.

ESG ecosystem map

(Source from the White Paper on ESG Development and Innovation in China 2021)

Issuance of ESG Theme Funds in Mainland China from 2004 to 2021

(Source from the White Paper on ESG Development and Innovation in China 2021)

In terms of fund types, there is a large gap in the number of different types of funds. Passive index funds account for nearly half (46%) of the market size, followed by partial stock hybrid funds (26%) and general stock funds (17%). However, according to the scale, partial stock hybrid funds account for the largest share (32.02%), followed by passive index funds (29.45%), and stock general funds (25.80%).

(Source from the White Paper on ESG Development and Innovation in China 2021)

The White Paper also points out that responding to national policies, meeting the needs of investors, and pursuing stable investment returns are the main driving forces for financial institutions to carry out ESG investment. At present, many excellent financial institutions, including China AMC, Industrial Bank, and China Ping An, give full play to their professional advantages, seize the opportunities to innovate and practice. They integrate ESG into the company's development strategy, establish their ESG management structure, develop new financial businesses and products, cooperate with all parties to promote social progress and contribute to the construction of China's sustainable financial ecosystem.

Panorama of ESG Innovation Practice

(Source from the White Paper on ESG Development and Innovation in China 2021)