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China’s green investing trend spurs new Sino-Securities ESG indexes

ESG
By Hui Ching-hoo   
April 7, 2021

Chinese index provider Sino-Securities Index Information Service (Shanghai) Co (SSI) has introduced a series of indexes that focus on sustainability to capture the rising green investment trend as Beijing puts greater focus on climate change.

SSI teamed up with Hong Kong venture capital manager Donkey Ministry to roll out nine large- and mid-cap Chinese equities indexes this February, including five with environmental, social and governance (ESG) screening.

The ESG benchmarks can provide Mainland investors with more options to access sustainable investing, according to Liu Zhong, founder and general manager of SSI.

“ESG is becoming one of the most popular investment themes in China’s ETF [exchange-traded fund] space as the government outlines a number of initiatives to facilitate green energy and climate-related developments,” Liu says in an interview with Asia Asset Management.

Chinese investors have been allocating more to green-themed funds since Beijing outlined a number of initiatives to facilitate green energy and climate change-related developments.

Last year, the government set a target for carbon dioxide emissions to peak before 2030, and to achieve carbon neutrality before 2060.

Local asset managers have been active in launching ESG funds to capitalise on the green investment trend. Figures from China’s Ping An Insurance show that the number of ESG funds in China almost doubled to 19 last year from ten in 2019, with net flows into the funds growing 36% year-on-year.

According to Liu, ESG indexes like the SSI DM large-cap ESG index look attractive to investors because back-testing showed they could consistently outperform the benchmark CSI 300 Index.

China’s index market is dominated by China Securities Index Co (CSI), a unit of the Shanghai and Shenzhen bourses, which has more than 4,000 benchmarks. But Liu believes there is still room for more index providers, especially those with expertise in thematic and ESG-related indexes.

“We position ourselves as a complement to CSI. SSI mainly concentrates on innovative benchmarks such as ESG, sector, and thematic indexes, while the focus of CSI is more on broad-based and generic indexes,” he says.

He believes this positioning allows the company to take advantage of the trend where Chinese ETF investors are moving from benchmark equity index funds to more customised products.