China Southern Asset Management has launched its first environmental, social and governance (ESG)-themed fund, marking the company’s first move into sustainable investing.
It comes over a year after industry group Asset Management Association of China released guidelines for sustainable investing in November 2018, aimed at encouraging domestic fund houses, pension managers, and insurance firms to develop ESG investment capabilities to promote social responsibility.
But ESG-themed funds have existed in China well before then, with the oldest dating to 2006.
There are now 32 such funds, including eight launched since the guidelines, with 21.64 billion RMB (US$3.08 billion) of combined assets, according to figures from fund advisory firm Morningstar.
China Southern Asset Management is the newcomer. Top rivals, including Bosera Asset Management, Hwabao WP Fund Management and E Fund Management, had already launched seven ESG funds in total after the guidelines were issued.
The China Southern ESG Theme Equity Fund, which was unveiled on December 2, targets both institutional and retail investors and is managed by Hui Zhang, who says it’s aimed at capitalising on the growing adoption of ESG investing criteria in the country.
“As China further opens its financial market, many Chinese firms have been improving their commitment to ESG to better meet the demands of global investors who use ESG as a screening criteria,” Mr. Zhang says in an interview with Asia Asset Management, adding that “China will take the lead in disclosing ESG standards”.
China has made it mandatory for all listed companies and bond issuers to disclose ESG risks associated with their operations by 2020.
According to Mr. Zhang, his company waited until now to introduce the fund because it took time to integrate the ESG concept into the investment research system.
He says the fund screens out companies from “sinister” industries such as tobacco and porn and uses financial analysis and big data to identify quality ESG-compliant firms listed in China for long-term value creation.
He says ESG will remain one of the major product themes for his company, which this year expanded its range with the introduction of thematic active and passive funds such as the China Southern Technology Innovation Hybrid Fund and MSCI A Inclusion Exchange-traded Fund.
Shenzhen-based China Southern Asset Management had $147.6 billion of assets under management as of June 2019.