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China’s sustainable funds buoyed by record launches in third quarter

Morningstar
By Hui Ching-hoo   
November 30, 2022

China’s sustainable fund market reversed course and drew US$1.52 billion of net inflows in the third quarter, thanks to a record 24 fund launches that raised a total $3.65 billion, according to a report by Morningstar.

Although this was a turnaround after investors pulled out a net $1.56 billion through the first half of the year, the inflow in July through September was 80.4% lower than the $7.74 billion which poured into China-domiciled sustainable funds in the third quarter of 2021.

“The majority of [new fund launches] are climate-focused, and the launch of eight new carbon neutrality-themed exchange-traded funds was the main driver of the net inflows during the quarter,” Dean Wang, China’s associate analyst of manager research at Morningstar, says in the report published on November 28.

E Fund CSI SEEE Carbon Neutral ETF attracted the largest net inflow of $373.45 million. The fund was launched in July.

Wang says investor awareness of environmental, social and governance investing remains low in China but regulators have been pushing for greater ESG adoption among asset managers.

“Also, in July 2022, the Shenzhen Exchange launched a slew of new ESG indices based on the CNI ESG Ratings Methodology, a new initiative with index ratings based on objective rules and public information," he says.

China’s sustainable fund assets as of September were $30.4 billion, down 35.6% from $47.2 billion in September 2021.