On June 30, the China SIF 2020 Summer Summit was successfully held virtually. The cloud conference aroused widespread attention of the market. A list of opinion leaders and esteemed speakers shared their views on the ESG investment strategy in the context of Covid-19 from perspectives of banking, credit rating, asset management, information disclosure, and green finance standards, etc. China SIF is always seeking longer-term solutions to environmental and social problems, and this Summit is particularly aimed at promoting a more sustainable recovery and a more resilient economy.
Dr. Peiyuan GUO, Chairman of SynTao Green Finance and China SIF, hosted over the Summit. Opening remarks were given by Rebecca Mikula-Wright, Director of Asia Investor Group on Climate Change (AIGCC); Sau Kwan, President of E Fund Management; and Jun YAN, Chairman of Constitution Committee of Society of Entrepreneurs & Ecology (SEE).
Dr. Peiyuan GUO, Chairman of SynTao Green Finance and China SIF, hosted over the Summit
.png)
L: Rebecca Mikula-Wright, Director of AIGCC
M: Sau Kwan, President of E Fund Management
R: Jun YAN, Chairman of Constitution Committee of SEE
Dr. Jun MA, Chairman of China Green Finance Committee, Member of Central Bank Monetary Policy Committee, and Director of Center for Finance and Development at Tsinghua University delivered the first keynote speech. He pointed out that sustainable investment in China in recent years has significantly improved driven by regulatory policies, international collaboration, and positive ESG investment performance. However, compared to European and US markets, ESG products in China market account for a rather small proportion of all asset management products. This is mainly because institutional investors are not sufficiently aware of the ESG concept, and ESG investment tools and data are still somewhat underdeveloped. Dr. Jun MA suggested to promote sustainable investment in China through (1) further enhancing the ESG investment awareness of institutional and individual investors, (2) strengthening the environmental information disclosure of listed companies, bond issuers and financial institutions (FIs), and further strengthening the availability and applicability of ESG data, (3) improving ESG data applications and learning to be active shareholders, engaging with investees on ESG issues to exert positive influence.
.png)
Dr. Jun MA, Chairman of China Green Finance Committee, Member of Central Bank Monetary Policy Committee, and Director of Center for Finance and Development at Tsinghua University
Eric Usher, Head of UNEP FI, Mark Mills, Partner of Generation Investment Management, and Brian Cahill, Managing Director of Global ESG at Moody’s Investors Service all expressed that in the context of Covid-19, ESG issues matter more than ever and attention to ESG has witnessed an increase around the globe. Among ESG, the social aspect (S) is the most affected because the pandemic has widened social inequality; in terms of environmental aspect (E), we are still facing major challenges such as climate change; as of the corporate governance (G), the pandemic reinforces the value and importance of sound corporate governance. Eric Usher pointed out that the banking industry, especially the Principles for Responsible Banking (PRB) signatories, has played an active and extensive role in fighting the pandemic, including maintaining businesses’ liquidity, suspending the repayment of loans to vulnerable households, and providing financial support to source the medical equipment needed to shore up the health system; FIs and regulators are linking the pandemic to climate and other sustainable risks. Mark Mills shared the impact of the pandemic on sustainable investment and how to respond to it, emphasized the important role of sustainable investment in economic and social recovery, and recommended investment institutions to give full play to their influence to drive a sustainable recovery. Brian Cahill analyzed the growing ESG influence in the post-pandemic era from the perspective of credit ratings and pointed out the three major trends brought about by the Covid-19, including greater focus on institutional preparedness for major identified risks, especially climate change and environmental risks; heightened focus on social risks, including healthcare and social inequality; and broader and deeper awareness of the links between corporate sustainability, reputation and credit risk.
.png)
Eric Usher, Head of UNEP Finance Initiative
Mark Mills, Partner of Generation Investment Management
Brian Cahill, Managing Director - Global, Environmental, Social and Governance, Moody’s Investors Service
The latest report on China A-share ESG rating was released during the Summit released titled: An Evolving Process: Analysis of China A-share ESG Ratings 2020. Rui ZHANG, Managing Director of SynTao Green Finance, stated that since 2018, the ESG information disclosure of A-share listed companies has steadily improved, and so the ESG ratings. Over the same period, the level of ESG risk exposure of listed companies has also increased significantly. In the past year, 61.6% of CSI 800 constituent companies have incurred ESG controversies. In China A-share market, ESG rating is found positively correlated to stock price performance.
Rui ZHANG, Managing Director of SynTao Green Finance, released the report of An Evolving Process: Analysis of China A-share ESG Ratings 2020
Afterward, Rui ZHANG and Yuebin YANG, Associate Director and Fund Manager of Equity Investment at AXA SPDB Asset Managers, discussed the application of ESG ratings in ESG investment. Yuebin YANG said Chinese mutual funds are facing a great opportunity in field of ESG investment. It is necessary to combine value investment and ESG concept organically. In terms of ESG strategy, internationally recognized shareholder advocacy and negative screening strategies are quite universal and need to be localized according to local context; in terms of data, a combination of internal and external data is adopted and external ESG ratings can play an effective supporting role.
L: Rui ZHANG, Managing Director of SynTao Green Finance
R: Yuebin YANG, Associate Director, Fund Manager, Equity Investment, AXA SPDB Asset Managers
At the end of 2019, the Stock Exchange of Hong Kong released the amendments to the Environmental, Social and Governance (ESG) Reporting Guide and related Listing Rules. The amendments would take effect on July 1, 2020. Regarding the upcoming HKEX ESG Guide, Tao LIU, Partner of SynTao, Katherine Ng, Managing Director, Chief Operating Officer and Head of Policy and Secretariat Services, Listing Division of Hong Kong Exchanges and Clearing Limited, and Dr. Youwei ZHU, Director of Strategic Research of Corporate Development Department in Huatai Securities exchanged views. Katherine Ng introduced the consultation process of the latest ESG information disclosure requirements. The latest ESG Guide aims to make ESG as an effective tool for risk management; it emphasizes the materiality of ESG disclosure, responds to climate change-related risks and social risks, and introduces relevant mandatory disclosure requirements. Youwei ZHU shared the positive impact brought by the HKEX ESG Guide from the perspective of both a listed company and an investor. He said following the ESG Guide, Huatai Securities has strengthened its own ESG management system and disclosure; in addition, as an investor, Huatai Securities has integrated ESG into its investment decision processes and carried out ESG investment-related research and training.
TL: Tao LIU, Partner of SynTao
TR: Katherine Ng, Managing Director, Chief Operating Officer and Head of Policy and Secretariat Services, Listing Division, Hong Kong Exchanges and Clearing Limited
B: Dr. Youwei ZHU, Director of Strategic Research, Corporate Development Department, Huatai Securities
The ESG and Engagement session was moderated by Lei FU, Founder of Y2 Capital Partners and Board Member of China SIF. The guests shared their experience and approach on ESG engagement, which are commonly employed in international sustainable investment, and discussed how sustainable investors can effectively play the role of active owners. Robin Hu, Senior Managing Director and Head of Sustainability & Stewardship Group in Temasek International, pointed out that in the first quarter of this year, 66% of the shareholders’ proposals at the AGM were directly related to ESG engagement. In the face of the three biggest challenges of climate change, scarcity of natural resources, and social inequality, companies with poor ESG management will not have an advantage in the risk-reward ratio, and their financing costs will be higher. For consumers, employees, and investors such companies will also be less attractive. Dr. Christine CHOW, Director, Head of Asia and Global Emerging Markets Stewardship of Federated Hermes International, brought forward three key points of engagement: first, fund managers and analysts need to know the target company very well, and the target company is willing to communicate on details of the company’s ESG management and performances. Second, identify a champion in the company that could drive institutional changes. Third, respect and gratitude for everyone you communicate with, because they are closely related to the target company's ESG management and are the ones who promote ESG improvement. Dr. Christine CHOW suggested that companies and banks should pay more attention to the climate change related risks, consider an exit plan for coal fired power stations and related financing, and gradually transit to renewable energies.
TL: Lei FU, Founder of Y2 Capital Partners, Board Member of China SIF
TR: Robin Hu, Senior Managing Director and Head of Sustainability & Stewardship Group in Temasek International
B: Dr. Christine CHOW, Director, Head of Asia and Global Emerging Markets Stewardship, Federated Hermes International
On May 2020, the People's Bank of China (PBoC), the National Development and Reform Commission (NDRC), and the China Securities Regulatory Commission (CSRS) jointly issued the Green Bond Endorsed Project Catalogue (2020 Edition) (Draft for Consultation). Grace GUAN, Secretary General of China SIF, moderated the China Green Standards Session, together with Chaoni HUANG, Executive Director and Head of Sustainable Capital Markets, Global Markets APAC at BNP Paribas, and Huan SHAO, China Programme Manager of Climate Bonds Initiative (CBI) discussed the changes in the 2020 Catalogue and shared feedback from international investors. Both guests expressed that although the pandemic had an impact on the green bond and sustainable bond markets, they recovered rapidly since April. Compared to the same period last year, more money went into environmentally and socially friendly projects, supporting the achievement of sustainable development goals (SDGs). Regarding the green bond catalogue, Huan SHAO said that the 2015 Catalogue have supported a large number of green projects and the inflow of green funds; the highlight of the 2020 Catalogue is the exclusion of coal, which is more in line with international practices, while domestically the 2020 Catalogue is better aligned with the NDRC Catalogue in terms of structure. Chaoni HUANG pointed out that the current international investors' holding rate of domestic green bonds is only around 2%; the 2020 Catalogue is conducive to reducing the research cost of international investors and reducing their concerns about clean coal; if the Catalogue could address more on climate change, it would be more conducive to attracting international capital. She also addressed that at present, international sustainable investors not only focus on the green performance at the project level but also on the overall sustainability performance of the issuer. Improving the ESG performance of the issuer also helps increase international capital inflows.
TL: Grace GUAN, Secretary General of China SIF
TR: Huan SHAO, China Programme Manager (CBI)
B: Chaoni HUANG, Executive Director, Head of Sustainable Capital Markets, Global Markets APAC at BNP Paribas
The final session of the Summit focused on Implementing TCFD, moderated by Valerie Kwan, Project Manager, Climate Action 100+ of AIGCC. At the end of 2015, with the support of the Financial Stability Board, the Task Force on Climate-related Financial Disclosure (TCFD) was established, aiming to help FIs assess climate change-related risks and opportunities by formulating a climate-related financial disclosure framework. Hong YIN, Deputy Head of the Modern Finance Research Institute at Industrial and Commercial Bank of China (ICBC), stated that since the launch of China-UK TCFD pilot program at the end of 2017, the number of pilot financial institutions has increased to 13, covering all financial sectors including banking, insurance, and asset management. In addition, Huzhou as a prefecture-level city has also joined the pilot. The working group has formulated an environmental information disclosure framework, developed an action plan for the pilot work, and has issued progress reports for two consecutive years. Hong YIN said that the current pilot FIs have made substantial progress in environmental information disclosure, and the disclosure covers the four major aspects including governance, strategy, risk management, indicators and targets. Since 2012, the then China Banking Regulatory Commission has issued the Green Credit Guidelines and KPIs for implementing Green Credit, which set requirements to 21 major banks, including ICBC, to establish a green credit system. This laid a good environmental disclosure foundation for banks in terms of infrastructure, capacity, and data; but for other FIs, there are still challenges to varying degrees. Chunfeng LAN, Deputy Director in Huzhou Bureau of China Banking and Insurance Regulatory Commission, shared the practice and progress of Huzhou in carrying out green finance, promoting the environmental disclosure of FIs, and the development of green building in collaboration with green finance. Chunfeng LAN said that Huzhou has formulated a standard template for environmental information disclosure for FIs, aiming to improve the credibility of the disclosure. The local pilot FIs have been increased from the initial four to 19 major banks; green finance information system construction has been strengthened among banks, especially corporate banks. There are plans in the future to include insurance companies in the pilot, establishing a green insurance statistical system, innovating green insurance disclosure, and expanding the influence of environmental information disclosure.
.png)
TL: Valerie Kwan, Project Manager, Climate Action 100+ of AIGCC
TR: Hong YIN, Deputy Head of the Modern Finance Research Institute at ICBC
B: Lan Chunfeng, Deputy Director in Huzhou Bureau of China Banking and Insurance Regulatory Commission
Dr. Peiyuan GUO concluded at the end of the conference that the heated discussions are a kind of manifest that ESG and sustainable investment are gradually entering the mainstream and exhibit bright prospects in China. He suggested to strengthen ESG infrastructure, especially ESG information disclosure, data services, evaluation standards, and the cultivation of long-term investors. China SIF will continue to carry out research and facilitate exchanges around the above issues to contribute to the development of China ESG investing.
The China SIF Summer Summit attracted more than 500 people from government departments, investment institutions, banks, listed companies, academic institutions, NGOs, and the media, and nearly a thousand people watched the Summit through Sina Finance and Wind live broadcast. The Summit is hosted by SynTao Green Finance together with AIGCC; partners include Moody’s, E Fund Management, AXA SPDB Asset Managers, Constitution Committee, SEE, Wind, and Sina Finance.
Initiated in 2012, China Social Investment Forum (China SIF) provides an international platform for exchanging and sharing ideas on responsible investment, green finance and sustainable development. China SIF is dedicated to promoting ESG and sustainable investment, contributing to a responsible capital market in China.
Since its establishment, China SIF has invited domestic and foreign experts, investment institutions, researchers, listed companies and relevant media to share development trends, research results, practical experience and cases of sustainable investment. China SIF’s influence has been extended broadly as a series of landmark reports and research results were published, such as Decennial Report on the Responsible Investment in China, China Sustainable Investment Review, and A share ESG database etc.