China Sustainable Investment Review 2020, written by SynTao Green Finance and China Social Investment Forum (China SIF), was released at the 8th China SIF Annual Conference. Since 2019, this series of reports has been released annually to reflect the development context of China's sustainable investment and help stakeholders grasp the trend of China's ESG market. The following nine figures represent the main findings of China's Sustainable Investment Review 2020.
China's Sustainable Investment Market Has Grown Significantly
According to publicly available information as of October 2020, the total size of China's sustainable investment market was about RMB 13.71 trillion1, with an increase of approximately 22.9% over last year. Among them, the balance of green credit was RMB 11.55 trillion; the size of pan-ESG mutual funds was RMB 120.9 billion; the ESG wealth management products were around RMB 23 billion; the total amount of green bonds issued was RMB 1.16 trillion; the total amount of social bonds issued was RMB 782.7 billion; and the actual capital contribution of green industry funds was RMB 97.661 billion.
1 The statistical dimensions for different types of asset data are not exactly the same. Please refer to the Report for more details.
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Fig. 1 The Size of China's Responsible Investment Market 2020
(Note: Please refer to the China Sustainable Investment Review 2020 for the data sources of the figures in this article.)
Green Financial Policies show great strength
As of October 31, 2020, China's central and local governments have promulgated 98 green finance-related policies in 2020, showing great strength by SynTao Green Finance's study. In order to more objectively reflect the efforts of local governments to promote green finance in 2016 to 2019, SynTao Green Finance has scored each green finance policy based on the detail of the implementation guidelines and the scope of policy impact. The scores provide a measure of the strength of green finance policies for each municipality and province. The linear regression analysis of the green policy strength score with the total number of bonds issued and the total scale of bond issuance concluded each release of a green financial policy resulted in at least 0.785 green bonds being issued. On average, every green financial policy will attract at least RMB 890 million in green bond issuance.
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Fig. 2 Analysis of China's Local Green Bond Issuance and Its Relations with Local Green Financial Policy
ESG Disclosure by Listed Companies Has Been Steadily Improved
As of September 7, 2020, 1,009 A-share listed companies, or 25% of all listed companies, had issued 1,022 CSR reports for the year 2019. Among them, 606 are listed on SSE, 399 on SZSE; 116 companies are dual listed on the A share and H share markets.
Fig. 3 Release of CSR Reports by A-Share Listed Companies 2011-2020
Pan-ESG Mutual Funds Increase Rapidly
As of the end of October 2020, a total of 127 pan-ESG mutual funds have been launched by 49 fund management companies, including 63 equity funds, 59 * funds and 5 bond fund. The overall size of pan-ESG funds exceeded 120.9 billion yuan, accounting for 2.16%, by size, of all equity funds and * funds, with an increase of 18% than the proportion of 1.83% in last year.
Fig. 4 The Development of the Number and Size of Pan-ESG Mutual Funds
The Number of Pan-ESG Stock Indices Steadily Increases
As of the end of October 2020, 52 indices that use environmental (E), social (S), or corporate governance (G) factors to screen constituent A-shares have been released on the SSE and SZSE (collectively pan-ESG indices), mainly consisting of 15 indices of the ESG Select category, 6 of the Corporate Governance Select category, 2 of the Green and Low Carbon Select category, 27 with the theme of Energy Conservation and Environmental Protection, 1 with the theme of Poverty Alleviation and Development, 1 with the theme of Blue Economy.
Fig. 5 The Number of Pan-ESG Indices Shows an Increase
ESG Indices of the Select Category Performed Better in the Medium Term (Three-Year)
Of the 52 pan-ESG indices, most ESG indices of the select category outperformed their benchmark indices and the indices of the theme category in annualized yield or annualized volatility. In particular, they were far less volatile than those of the theme category, indicating the good stability of ESG strategy.
Fig. 6 Three-year Performance of ESG Indices of the Select Category and the Theme Category
Commercial Banks Speed Up the Issuance of Pan-ESG Wealth Management Products
Since the first ESG-themed wealth management product was rolled out in April 2019, 10 commercial banks and wealth companies had issued 47 pan-ESG wealth management products as the end of November 2020. If based on conservative estimation, the current size of ESG-themed wealth management products from the banks is more than RMB 23 billion.
Fig. 7 Examples of Recent Commercial Bank ESG Wealth Management Products
More Than 80% of the Individual Investors Would Like to Consider ESG Factors in the Investment
Despite their limited understanding of sustainable investment, a majority of China's individual investors will continue to consider, in their investment, factors which fall under the scope of sustainable investment, such as “environment”, “labor”, “health”, and “business ethics”. More than 80% of the individual investors would like to consider ESG factors in the investment. High-net-worth individuals (HNWIs), young investors and women account for the higher proportions of the investors who always consider ESG factors in investment.
Fig. 8 Individual Investors' Willingness to Consider Sustainable Investment
Motivations and Challenges for Institutional Investors to Practice ESG Investment
To lower investment risks and regulatory trends are the main motivations for China's institutional securities investors to practice ESG investment. Limited understanding, lack of reliable ESG data sources and lack of ESG evaluation methods represent major challenges for institutional investors to consider sustainable investment.
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Fig. 9 Motivations and Challenges for Institutional Investors to Practice ESG Investment
The English version of the Report is coming soon.