China’s sustainable fund assets soared nearly 80% to an all-time high of 339 billion RMB (US$53.55 billion) in the first nine months of last year as Beijing’s plan to achieve net zero carbon emissions drove record inflows into the funds, according to investment consultancy Morningstar Inc.
The Chinese government in September 2020 set a target for carbon dioxide emissions to peak before 2030, and to achieve carbon neutrality before 2060.
“China investor interest in environmental sector and carbon-neutral thematic funds has increased dramatically since then,” Morningstar says in a report on January 24. “This materialised into record flows of 81.81 billion RMB to China-domiciled sustainable funds during the first three quarters of 2021.”
Those inflows drove assets up 78.4% in the nine months through September from 190 billion RMB at the end of 2020.
Chinese investor appetite for sustainable strategies is largely influenced by market conditions and fund performance rather than the characteristics and benefits of environmental, social and governance investing, according to Rachel Wang, Morningstar’s director of manager research for China.
She notes that China’s financial regulator has been promoting greater ESG adoption among assets managers as Beijing seeks to develop green investment.
“Several large fund houses have moved toward more ESG-informed investing and built out ESG capability over the past three years,” Wang says in the report.
Figures compiled by Morningstar show that there were 54 sustainable fund listings in China in the first three quarters of last year, including 43 low-carbon economy or carbon neutrality funds, raising the total number of sustainable funds to 138 as of September 2021.