Asset managers in China are no strangers to sustainable investing — but doing so in a way that fits into formal social responsibility frameworks is still “relatively new,” said the chief executive of a Chinese financial services company.
ESG — or environmental, social and governance — refers to a set of criteria used to measure a company’s performance in areas ranging from carbon emissions, to contributions to society and staff diversity.
“Responsible investing and looking at the long-term sustainability of our portfolio is not new to the investment community in China, but we didn’t really comply it within the regime of ESG,” Li Yimei, CEO of China Asset Management, told CNBC’s “Squawk Box Asia” on Wednesday.
Li gave an example of a home appliance company that had initiatives to recycle metal waste and manage their supply chain in an environmentally friendly way. The firm’s sustainability efforts were not formally disclosed to the public, and it was given a low score on MSCI’s ESG Rating.
Luis Alvarez
“We had a very detailed discussion with them and then actually guided them to have more, better disclosure — and then their rating in the ESG for MSCI actually went up two notches,” said Li, who is a member of CNBC’s ESG Council.
“ESG, by its name, is relatively new,” she said, adding that it’s one reason why the market for ESG funds is smaller and less developed in China compared to other regions.
Future of ESG in China
Li said Chinese asset managers have been trying to adapt global ESG indicators to the local context by taking into account China’s business and policy environment.
Asked by CNBC about the difficulties in deciphering ESG data because disclosures are not standardized, Li said that won’t change overnight but pointed to steps taken by the government.
“Our policymakers actually are pushing very hard for standardized disclosure for the A-share listed companies, and we do think that will change relatively fast,” Li said.
Still, businesses should make their sustainable, environmental and socially responsible programs public, she said.
“(This is) very localized information, so we would also want to help international companies get access to that information,” she said.
Source: CNBC