Report Release | White Paper on ESG Development and Innovation in China 2022
White Paper Sheds Lights on ESG Development in China and Beyond
On December 20, 2022, China Alliance of Social Value Investment (CASVI) and China Asset Management (China AMC) jointly released the White Paper on ESG Development and Innovation in China 2022 (hereinafter referred to as the "White Paper") at the Caijing Sustainable Development Summit for the second year. Combined with cutting-edge and discursive thinking, the report tracks the global ESG development dynamics in 2022 and the latest progress in ESG-related fields in China over the year.
Starting from the status quo of global ESG development in 2022, the White Paper introduces the ESG-related policies and the development of market practice in major international markets, and discusses the root cause of the ESG backlash in Europe and the United States. At the same time, the White Paper also outlines the latest characteristics of China's ESG development, explains the great practical and strategic significance the ESG investment and financing hold for China to achieve its high-quality and sustainable development, and looks into where China's ESG will head for down the road.
The White Paper points out that many countries and regions have achieved substantial progress in tackling climate changes and strengthening the ESG disclosure in 2022. By formulating national sustainable development strategies, introducing ESG-related policies and promoting the development of carbon markets, countries are pushing forward their carbon neutrality goals, while squeezing the "bubble" of sustainable financial markets and curbing "greenwashing" behaviors. In 2022, although the growth rate of global ESG fund size has slightly slowed down due to macro factors, ESG products still maintained net inflows in constrast to the net outflows of traditional financial products. The ESG practices of international leading financial institutions and entities are looking for innovation, shifting from leveraging the strengths of their businesses to building an ecology of strong alliances, thereby harnessing the impact of leading institutions.
The White Paper highlights the trend towards mainstreaming ESG in the Chinese policy system. The report of the 20th CPC National Congress revealed that the Chinese path to modernization is consistent with the essence of ESG and the SDGs. In 2022, a number of government departments issued ESG-related policies to clarify their response and support for ESG concepts. In addition, they work to make ESG tools and products more standardized and diversified, turn information disclosure into a mandate and strengthen international cooperation at a faster rate.
Over the past year, China's ESG policies concentrated in promoting ESG standards as well as innovative product pilots, strengthening information disclosure, and carrying out international cooperation.
According to the White Paper, China's ESG ecosystem is increasingly diverse and active. The ESG asset management scale continues to expand, asset management capabilities become more and more professional, and the quality of third-party professional services is improving by leaps and bounds.
In terms of capital, domestic asset owners and asset managers are practicing ESG to a deeper extent in a more innovative way. According to the statistics, the total scale of ESG-themed funds in Chinese mainland has reached RMB 273.464 billion. Fund companies taking up more than 50% of the public offering fund market have signed PRI; the existing scale of ESG-themed wealth management products in banks is about RMB 104.9 billion; the scale of bond investment by insurance companies in green industries is expected to be RMB 1.05 trillion; the insurance private-equity fund is RMB 83.804 billion; and the equity investment plan is RMB 35.104 billion.
China AMC, one of the first fund companies in China to engage in ESG investment, integrates ESG into corporate strategy, organizational structure, investment management and corporate operation. With value investment as the core and ESG as the underlying logic, China AMC strives to balance shareholder value and social responsiblity.
In terms of enterprises, we have seen a noticeable increase in the level of information disclosure and corporate governance of listed companies in China. In 2022, the ESG report disclosure rate of A-share listed companies reached a historical high, but the overall disclosure rate of 29.45% still signals room for improvement; the corporate governance structure of listed companies is more diversified and standardized.
China has made astounding advances in laying a solid foundation for the development of ESG investment. Multiple market players, including the government, regulators, business organizations and social organizations, have participated in designing ESG standards and accelerated the formulation of such standards. The development and circulation of ESG foundation and rating data have been deepened and sped up. More ESG-themed index in the domestic market are released. By the end of September 2022, a total of 36 ESG indexes are released by the China Securities Index and the Shenzhen Securities Information, half of which were newly released in 2022.
The White Paper predicts the future development of China’s ESG. In terms of concepts, it is predicted that the intrinsic linkage and common ground between ESG and national policies will be actively explored, and Chinese regulators and the market are expected to embrace the "dual substantive" paradigm of ESG. In terms of policies, it is predicted that the policy package in the future will give equal priority to government incentives and regulation. In terms of the market, the domestic ESG investment scale is projected to maintain an upward trend and cover a wider array of asset classes. In addition, much ink has been spilled over the concept of transformation in the field of ESG investment. As the market scale of sustainable finance expands at a high speed and relevant policies are released at the national level, the domestic ESG standard system will embrace a period of rapid development. Enhanced regulation and finance innovation in China will further improve data collection, application and management in the field of ESG investment. On the international front, regional cooperation and international integration of ESG standards and regulations will gain higher frequency and depth.