Sustainable Development Finance in China丨December 2019

1. China Sustainable Investment Review 2019: Pan-ESG Public Funds Account for only 2%, with Tremendous Potentials

China Sustainable Investment Review 2019 was released during the 2019 China Sustainable Investment Week and the 7th China Sustainable Investment Annual Forum in Beijing, on December 3, 2019. Organized by SynTao Green Finance, Sina Finance and co-hosted by the United Nations Principles for Responsible Investment (UN PRI), United Nations Environment Programme Financial Initiative (UNEP FI) , Sustainable Stock Exchange Initiative (UN SSEi) and the Economic View Institute, the forum focused on the development of ESG and responsible investment in China, and explored the implementation of sustainable finance. Zhang Rui, Managing Director of SynTao Green, released the China Sustainable Investment Review 2019, at the forum pointing out that China’s green credit balance was 9.66 trillion yuan, and the scale of pan-ESG public offering securities funds was 48.5 billion yuan together with the green bond issuance totaling 1.02 trillion, the social bond issuance totaling 422 billion yuan, and the actual investment scale of the green industry fund reaching 9.1 billion yuan. Statistics show that there are now 95 pan-ESG public funds with 47 equity funds, 47 hybrid funds, and 1 bond funds. Even though the overall scale of ESG stocks and hybrid public funds was about 48.5 billion yuan, accounting for only 2% of the entire fund scale, but it has a great potential to develop.

2. CBIRC and PBC Released the Report on China’s Inclusive Finance Development 2019

China Bank and Insurance Regulatory Commission and the People’s Bank of China have released the Report on China’s Inclusive Finance Development 2019, which presents the latest developments China has achieved in inclusive finance. According to the report, key areas supported using inclusive finance have continued to increase, and financial services for small and micro enterprises develop evenly among increment, expansion, cost reduction, and risk control. Inclusive finance in China is entering a stage of high-quality development. However, although inclusive finance has achieved great innovations and progress, it, in the current situation, cannot solve the problems of limited coverage, low efficiency, and high costs. Therefore, it urgently needs financial technology as a strong support to boost its development.

3. White Paper on ESG Development in China Reveals Three Major Trends

Recently, Sina Finance and International Institute of Green Finance (IIGF) of Central University of Finance and Economics (CUFE) have jointly released the China ESG Development White Paper (hereinafter referred to as “the White Paper”). The White Paper noted that ESG can reflect the concept of sustainable development as it discloses not only financial information, but also those of environmental performance, social responsibility and corporate governance. In recent years, as the concepts of responsible investment, environmental protection and sustainable economic development have gradually been accepted, and ESG continues to receive recognition. More investors are incorporating ESG considerations into their investment process, and are focused on long-term return on investment (ROI) and positive social impact. The White Paper also pointed out that there are three optimistic trends in ESG development. First, there will be a greater integration of ESG as investors are moving to incorporate them across their portfolios through the inclusion of ESG funds, green bonds, etc. Second, there will be more participation. Asset management companies will work more closely with their shareholders and executives, such as jointly submiting resolutions. Third, apart from financial information, ESG discloses other information such as environmental performance, social responsibility and corporate governance.

4. China Energy Finance Development Report 2019 Released

On November 20, “China Energy Finance Development Report 2019: Renewable Energy Cooperation, Investment and Financing between China and Belt and Road Countries” was released by International Institute of Green Finance (IIGF) of Central University of Finance and Economics (CUFE) at the International Clean Energy Forum (Macau). The report selects representative countries along the Belt and Road to analyzes their renewable energy development and future cooperation, investment and financing with China. This provide relevant case studies and experiences for discussing renewable energy cooperation, investment and financing between China and the Belt and Road countries.

5. Grant Thornton HK: Significant Increase In Corporate ESG Disclosures

According to the 2019 Corporate Governance Review released by Grant Thornton Consulting Services Co., Ltd, corporate disclosures of ESG have increased significantly. After analyzing 470 Hang Seng Composite Index (HSCI) companies, the Review found since Hong Kong Stock Exchange (HKEX)’s publication of “Review of the Environmental, Social and Governance Reporting Guide and related Listing Rules” on 17 May 2019, the percentage of HSCEI constituents that had formed a team dedicated to ESG reporting surged from 6% in 2017 to 27% in 2018.