Key Takeaways From The 5th China SIF Conference

By Dr. Peiyuan Guo 16 January, 2018

SynTao's Guo, a co-host, shares thoughts from the event

China has made rapid progress in green finance & is a pioneer in environmental stress testing & green assurance
The 1st equity index to incorporate ESG performances of listed co's in mainland China was launched at the event
Continued dialogue between practitioners & researchers will be key to the growth of China’s green finance market

The 5th China SIF (China Social Investment Forum) Annual Conference was held in Beijing on 5th December 2017. Since 2012, this event has aimed to promote the concept of responsible investment, encourage green finance and facilitate the sustainable development of China’s capital market.

“…this event drew significant attention from capital markets in China & around the world”

The theme of this year’s conference was “World Trends and China’s Practices”. Jointly hosted by SynTao Green Finance, Green Finance Committee of China Society for Finance and Banking, and Caixin Media and co-hosted by UN Sustainable Stock Exchange initiative and Principles for Responsible Investment (PRI), this event drew significant attention from capital markets in China and around the world. Although there were many other advances made, below are 3 main takeaways from the event:

1. ESG investment with Chinese characteristics is growing

One consensus from the conference was that ESG investment in China is making significant progress, and this was highlighted by Dr Ma Jun, chairman of the Green Finance Committee of China Society for Finance and Banking, in his opening speech.
He noted that in recent years, China has made rapid progress in green finance, and has become a global pioneer in policy architecture, local pilot programs, green bonds, green industry funds, environmental stress testing and green assurance.
However, he also emphasised that Chinese institutional investors, including asset managers, have started late in green finance compared to international peers. In order to catch up and improve the green finance market in China, Dr Ma made several suggestions:

  1. complete a mandatory environmental information disclosure mechanism for listed companies;
  2. promote the notion that green investment can improve long-term returns;
  3. state-owned long-term investors should take the lead in green investment;
  4. encourage the research and development of green financial instruments;
  5. support third-party assurance and rating agencies;
  6. build capacity for environmental risk analysis;
  7. encourage domestic institutional investors to disclose environmental information;
  8. And adopt principles for responsible investment.

According to Dr Ma Jun, China has made rapid progress in green finance…

…& has become a global pioneer in policy architecture, local pilot programs, environmental stress testing & more

Ma Jun Speech
Seperately, Liu Chuankui, Vice Secretary General of Insurance Asset Management Association of China, gave a few examples of growing ESG investment in China.
He showed that insurance funds, through equity, bond and other instruments, are investing in projects ranging from the national Belt and Road Initiative, to infrastructure construction projects, to civil projects in senior citizens’ care, to community renovation and regeneration and more.

Insurance funds can provide an important source of green finance for the economy

Clearly, insurance funds can provide an important source of green finance for the economy. In the near future, insurance funds are expected to maintain responsible investment focusing on social well-being, supply-side reform, and the optimisation of assets allocation.

2. Launch of the SGCX ESG50 Index

As interest in ESG investment grew, major institutional investors have increasingly adopted ESG factors in their decision-making and market analysis. In September 2017, SynTao Green Finance, a leading Chinese consultancy for responsible investment cooperated with Caixin Media, one of the most trusted source of financial and business news and information services in China, and released the “Landsea· China ESG Development Index”.

SynTao Green Finance & Caixin in Dec 2017 published the SGCX ESG50 Index…
…the first equity index incorporating ESG performances of listed co’s in the mainland Chinese market

Three months later in December 2017, SynTao Green Finance and Caixin came together again and published the SynTaoGF–CaiXin ESG 50 Index (SGCX ESG50 Index), the first equity index incorporating ESG performances of listed companies in the mainland Chinese market.
In order to quantify the ESG performances of listed companies, SynTao Green Finance developed an ESG indicator system that refers to international and domestic standards according to information disclosure level in the Chinese market. Companies’ ESG performances were quantified and evaluated through publicly available information and calculated into user-friendly ratings for investors to easily incorporate into their practice.
The universe of SGCX ESG 50 Index is CSI 300 index, one of the most commonly used equity index in the Chinese market. At the launching ceremony, 50 constituent stocks were presented with certificates as companies with the best ESG performances in Chinese stock market. These companies deserve more attention from investors for they have potential for long-term sustainable growth.
In the context of the speedy development of China’s economy and society, it’s important to measure ESG performances, which are also connected to companies’ long-term financial returns. The SGCX ESG50 Index is an essential tool for this measurement.

3. Fostering dialogue between practitioners and researchers

It was encouraging to see the sharing of knowledge between those who advocate information disclosure and those who implement such strategies. In the afternoon sessions of the conference, domestic and international practitioners and researchers joined in the four panel discussions.

Panel Discussions at the 5th China SIF Conference

  • Panel 1: Product Innovation on Green Finance for Institutional Investors
  • Panel 2: ESG Information Disclosure of Listed  Companies
  • Panel 3: ESG Integration in Asset Management
  • Panel 4: Sustainable Business: Responsibility Creates Investment Value

On one side, practitioners introduced various innovations such as national strategies in Indonesia for sustainable finance innovation and new regulations of stock exchanges in the world regarding ESG disclosure. On the other side, researchers analysed ESG reports of the companies listed in Shanghai and discussed methods to improve ESG information disclosure for listed companies. The gathering of stakeholders from different backgrounds was also significant, with representatives from law firms, stock exchanges, think tanks and businesses.
Looking ahead, continued dialogue between these various stakeholders will be essential for the growth of China’s green finance market.

Looking ahead, continued dialogue between various stakeholders will be essential for the growth of China’s green finance market

Panel discussion

Further Reading

  • China’s Green Planning For The World Starts With Infrastructure – China can exert greater external influence through infrastructure development but Professor Asit K Biswas and Kris Hartley from the Lee Kuan Yew School for Public Policy caution against it citing financial and environmental risks. See more
  • Companies Are Taking Water Security Seriously – Here’s How – CDP’s Cate Lamb shares key findings from their 2017 Global Water Report, which includes a 41% increase in companies disclosing and a record number of corporates achieving an ‘A’ score. Is putting an internal price on water the next step?
  • Hotels & SDGs: Moving Together On Water Risk – Forward thinking companies are re-aligning their strategies with the SDGs and so is the hotel sector. International Tourism Partnership’s Fran Hughes on their recently announced 2030 vision and goals
  • Droughts: Misery In Slow Motion – Floods and storm surges are sensational disasters but the World Bank’s new report shows droughts can actually be more impactful. We sat down with their Richard Damania to find out more
  • 5 Facts On Crop Failures Due To Water Risks – In 2016 China suffered 44 million tonnes of crop failure due to droughts and floods. Check out China Water Risk’s Max Leung’s five facts to get the latest info and see which regions are most at risk
  • Green Financing For Climate Resilience – We sat down with Dr Christine Chan from the Climate Bonds Initiative working group to get the latest on green finance globally & in China. How have China’s green bonds been received? What is next for investors?
  • Financing Water Resilience: Climate Bonds for China – Green or “climate” bonds is a rapidly growing market but there are verification concerns plus gaps for water-related investments. AGWA’s John Matthews & Climate Bond Initiative’s Anna Creed & Lily Dai introduce the new water climate bond standard that addresses these issues
  • Can APAC Lead In Adaptation Finance? – After attending two key climate conferences, including COP 22, CWR’s Hu shares why adaptation financing in APAC is crucial though it’s lagging and how the private sector can lead this effort
  • What China’s New Green Bond Rules Mean – China’s new green bond rules can make it a major player in the global green bonds market. Trucost’s Huang & Ip expand on their Chinese characteristics and how they can help raise the annual requirement of RMB 2 trillion for climate solutions & environmental clean up
  • Green Finance Revolution: China Can Lead – Can financing required to meet targets laid down in Paris be met? WRI’s Shouqing Zhu & Andrew Steer on how China can lead with five recommendations
Dr. Peiyuan Guo
Author: Dr. Peiyuan Guo
Dr. Guo Peiyuan, who holds a Ph.D. in Management from Tsinghua University, is the chairman of China Social Investment Forum, general manager of SynTao and chairman of SynTao Green Finance. Dr. Guo Peiyuan continuously focuses on research and practices about corporate social responsibility (CSR) and socially responsible investment (SRI), with abundant experience on research, training and consulting services. Now SynTao has become a leading CSR consulting company in China with offices in Beijing, Shanghai, Guangzhou, Shenzhen, Chengdu and Washington D.C. SynTao Green Finance is a founding member of Green Finance Committee of China Society for Finance and Banking. It is also the first CBI approved green bond verifier from China. Dr. Guo Peiyuan has served for over one hundred companies, governments, and social organizations home and abroad, including China Mobile, China Pacific Insurance, Amway China, Volkswagen, International Finance Corporation (IFC), World Wide Fund for Nature (WWF), etc. He has served as a judge in multiple CSR awards. Now he also teaches MBA course Business Performance and Sustainability in School of Economics and Management, Tsinghua University, and teaches international student course Social Innovation and CSR in School of Social Development and Public Policy, Beijing Normal University. He also serves as consultant, trainer or member in many organizations, including UNEP FI advisor in China.
Read more from Dr. Peiyuan Guo →