Cao Deyun’s Keynote Speech at the 2021 China SIF Annual Conference: Accelerating ESG Investments in Insurance Asset Management

Update time : 2021-12-13 10:31:22

Mr. Cao Deyun, Executive Vice President and Secretary-General of the China Insurance Asset Management Association, delivered a keynote speech at the 9th China SIF Annual Conference on 7 December 2021, theming on "Harmonization and Uniqueness of ESG Investing". He has introduced the current status of ESG development in insurance asset management, stating that ESG is an inevitable requirement for high-quality economic development. Mr. Cao pointed out that ESG investment matches insurance institutions' long-term prudent investment style. At present, insurance institutions have different degrees of practice in incorporating ESG at the levels of strategy, policies & procedures, investment process and product innovation. However, there is still room for improvement in the ESG risk management system, governance and organizational structure, information disclosure and data technology.

SynTao Green Finance and Sina Finance hosted the 9th China SIF Annual Conference; the co-hosts include UNEP FI (United Nations Environment Programme Finance Initiative and UN SSEi (United Nations Sustainable Stock Exchange Initiative). Policymakers, standard setters, asset owners, asset managers, financial intermediaries, and corporate and academic representatives from home and abroad exchanged their views. They shared their in*sights on the latest ESG development topics.

The following is the full keynote speech by Mr. Cao Deyun:

Cao Deyun’s Keynote Speech at the 2021 China SIF Annual Conference
Accelerating ESG Investments in Insurance Asset Management

Distinguished guests,
Good morning.
It is my pleasure to participate in the 9^th China SIF Annual Conference. The Insurance Asset Management Association of China (IAMAC) has participated in the China SIF Annual Conference for five consecutive years since 2016, witnessing the increasing influence of China SIF and its essential role in advancing the development of responsible investment in China. On behalf of the IAMAC, I would like to extend my warm congratulations to the China SIF Annual Conference! I would also like to take this opportunity to introduce to you the latest progress and trend outlook of ESG investment in China's insurance industry.

ESG Investment Aligned with High-Quality Development

The need to achieve high-quality development is stressed in the Resolution of the Central Committee of the Communist Party of China on the Major Achievements and Historical Experience of the Party over the Past Century, as adopted at the Sixth Plenary Session of the 19th Central Committee of the Communist Party of China. According to said document, innovation is to become the first driving force, coordination becomes an endogenous feature, green becomes the universal form, openness becomes the critical path, and sharing becomes the fundamental purpose, to promote quality change, efficiency change and dynamic change in the economic development.

The 19th Central Committee of the Communist Party of China has also clearly proposed that China's economy has shifted from high-speed growth to high-quality development after thorough argumentation based on the shift in China's development stage and the major social conflicts. One of the requirements of high-quality development is ecological priority and green development. Under the framework of carbon peaking and carbon neutrality, China will gradually and orderly achieve a comprehensive green and low-carbon transformation of production and lifestyle, which will bring about a broad and profound economic and social systemic change. ESG investment advocates the concept of sustainable development. It focuses on the harmonious development of the environment, society and corporate governance, which aligns with China's strategic goal of high-quality development and matches the long-term and sound investment style of insurance institutions. The development of ESG investment by insurance institutions is a re-examination of their investment philosophy, an upgrading of their investment approach and a change in their investment perspective, which will contribute to the green transformation and high-quality growth of the insurance industry and lay the foundation for their long-term healthy and sound development.

Current status of ESG Investment by Domestic Insurance Institutions

In August this year, the IAMAC conducted a particular questionnaire survey on ESG investment for domestic insurance institutions together with the International Institute of Green Finance (IIGF) of the Central University of Finance and Economics, aiming to better understand the actual situation of the insurance asset management industry in practicing ESG concepts, carrying out ESG investment and improving ESG risk management. Through the data analysis of the questionnaire feedback, the following conclusions are drawn:
First, most insurance institutions have deepened their understanding of ESG concepts strategically. Second, more than half of insurance institutions have incorporated ESG concepts into their institutional and standards systems. Third, insurance institutions have actively explored ESG investment mechanisms and ESG product innovation. Fourth, most insurance institutions' ESG risk management systems need to be improved. Fifth, insurance institutions still need to improve their understanding of ESG governance and sound organisational structure. Sixth, the work of insurance institutions to carry out ESG information disclosure and promote ESG data technology is still in its initial stage.

Since 2018, major insurance institutions like China Life Asset Management, Ping An Insurance Group and Taikang Insurance Group have successfully signed the Principles for Responsible Investment (PRI), putting into practice the concept of responsible investment and actively carrying out ESG-related layouts. For example, by incorporating ESG issues into the investment activities of the entire group, Ping An Insurance Group now has a better group sustainable development system, covering key areas such as responsible investment, commercial code, corporate governance, sustainable insurance, information security, artificial intelligence governance, sustainable supply chain, and the 2030 UN Sustainable Development Goals. Ping An officially signed the PRI in 2019 and has since joined initiatives and organisations such as the Task Force on Climate Related Financial Disclosure (TCFD) and Climate Action 100+.

Challenges and Development Suggestions for Insurance Institutions in Making ESG Investments

Although the ESG concept is gaining more and more attention from institutional investors, including insurance institutions, the systematic promotion of the " dual carbon" goals has created favourable conditions for insurance institutions to implement the ESG investment concept. However, China's insurance institutions still face challenges like incomplete policy mechanisms, low market activity, and lagging institutional capacity building when making ESG investments. On the one hand, a unified ESG evaluation index system adapted to China's market has yet to be established. The corresponding ESG investment guidelines and ESG investment regulatory mechanism have yet to be improved. On the other hand, a unified and clear ESG information disclosure framework and guidelines have not been established either. ESG data in the market is significantly differentiated and not sufficiently transparent, and incentive policies for insurers to participate in ESG investment are not yet in place. At the market building level, China's overall ESG investment market is still relatively small, with a limited range of ESG-related financial products, low market activity and defective financial products to suit the risk-return characteristics of insurers. At the level of industry institutions, from the relevant research conducted by IAMAC, there is still much room for improvement in terms of incorporating ESG factors into the strategic planning, institutional management, investment process, risk management and information disclosure of insurance institutions in China. Insurance institutions need to continue improving their ESG investment management and practice capabilities to carry out ESG investments..
To this end, both the policy side and the market side should carry out the promotion of ESG investment by insurance funds: At the policy end, first, it is necessary to gradually establish and improve the ESG-related policy system, including enhancing the ESG information disclosure system, strengthening ESG investment policy support and setting ESG investment evaluation standards; Second, it is necessary to build a supporting incentive mechanism for ESG investment, including the introduction of incentives to reduce the capital charge by insurers and increase tax concessions for them; Third, ESG-related investment guidelines should be issued, and a government-led ESG information exchange and sharing platform should be established. On the market side, first, it is necessary to strengthen ESG investment infrastructure capacity building; Second, it is essential to build a sound ESG investment practice mechanism; Third, it is needed to increase ESG investment product innovation; Fourth, it is necessary to actively carry out ESG investment international exchange cooperation and encourage other market institutions to improve the ESG investment ecosystem of insurance funds jointly.
At the same time, the Insurance Asset Management Association of China will continue to serve as an industry platform to promote sustainable green investments (ESG investments) by combining the two and playing an active role in addressing climate change and achieving the "dual carbon" goals.
First is the combination of concept promotion and policy guidance. In May this year, under the direction of the China Banking and Insurance Regulatory Commission (CBIRC), the IAMAC joined hands with various institutions in the insurance asset management industry to issue the IAMAC Initiative to Promote the Achievement of "Carbon Peaks" and "Carbon Neutrality" to promote the industry to raise its position further and gain a deep understanding of the "Dual Carbon Strategy" and the significance of green investment. In addition, the IAMAC is working with the regulatory authorities to draw up the Guidelines on ESG Investment by Insurance Funds, which aims to implement the new development concept thoroughly, accelerate the construction of a new development pattern, help achieve the goal of carbon neutrality by reaching the carbon peak, help the enterprises achieve high-quality development, and promote insurance funds to actively serve various economic activities with both environmental and social benefits.
Second is the integration of capacity building and international cooperation. The IAMAC is working with international organisations, professional bodies and higher education institutions to explore the establishment of a curriculum system that is suitable for the development of the industry and aimed at enhancing ESG investment capabilities so as to strengthen the professional capacity of insurance institutions to respond to climate change and adapt to the low-carbon transition. The IAMAC is also deepening its cooperation with domestic and international investment institutions and relevant international organisations to jointly promote the development of sustainable investment concepts, including ESG investment and stewardship management, promote best practice cases in related fields, and contribute to the financial industry's contribution to the achievement of China's "Carbon Peaking, Carbon Neutrality" goals.
Last but not least, I wish China SIF the very best and for China SIF Annual Conference to have great success!
Thank you all!

Cao Deyun
Executive Vice President and Secretary-General of the China Insurance Asset Management Association
Dec. 7th 2021

The 9th China SIF Annual Conference

Dec. 7th 2021 Beijing 08:45-17:30

Theme: Harmonization and Uniqueness of ESG Investing

Hosts: SynTao Green Finance, Sina Finance

Co-Hosts: United Nations Environment Programme Finance Initiative (UNEP FI), United Nations Sustainable Stock Exchange Initiative (UN SSEi)

Strategic Partners: Moody's, Harvest Fund

Partners: AXA SPDB Investment Managers, RepRisk

Supporters: CDP, IFC, ICMA, Huatai Securities, CBI, TUSDG, SynTao, Shenzhen Finance Institute, CUEB China ESG Institute, CCM CSR Promotion Center, iFinD, Conference Centre Connecting, AIGCC, UK PACT

(in PINYIN order)

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