China tops the US in ESG investment
What is ESG investment?
ESG investment is an investment strategy that focuses on environmental, social and governance issues.
China surpasses the United States in ESG Investment
China has overtaken the United States as the world’s largest destination for ESG investment, according to a new report.
The report, released by the Boston Consulting Group (BCG) and the Global Sustainable Investment Alliance (GSIA), found that China’s ESG market grew by 34 percent in 2016, while the US market grew by just 24 percent.
China is the world’s largest ESG investor, with $12.6 trillion in assets under management, according to a report from The Global Sustainable Investment Alliance (GSIA). The US is the second-largest ESG market, with $11.6 trillion in AUM, followed by Japan ($4.1 trillion) and France ($3.7 trillion).
What are the details of this news?
The report found that positive screening and negative screening are the most popular ESG investment strategies, used by 70% and 55% of investors respectively. Other common strategies include impact investing (44%), thematic investing (41%), and shareholder engagement (39%).
The study also found that institutional investors are the biggest players in the ESG space, with $10.1 trillion in AUM. Retail investors are the second largest group, with $9.4 trillion in AUM, followed by pension funds ($6.6 trillion) and insurance companies ($3.8 trillion).
This is the first time that China has topped the US in terms of ESG investment, and it is a sign of the growing importance of sustainability issues in the country.
This is still a small fraction of the overall asset management market in China, which was estimated to be worth $15 trillion in 2016.
The report found that the growth of ESG assets under management in China has outpaced the overall growth of the asset management market.
The report also found that Chinese investors are becoming more sophisticated in their ESG investing, with a growing number of institutions incorporating ESG factors into their investment decision-making process.
There are now more than 200 institutional investors in China that have dedicated ESG teams, up from just 50 in 2015.
The report’s authors expect this trend to continue, as more and more Chinese investors become aware of the importance of sustainability issues.
This is a significant shift from just a few years ago when the US was far ahead of China in terms of ESG investment. In 2016, for example, US investors pumped $US8.1 billion into ESG companies, while Chinese investors only allocated $US3.7 billion.
What’s driving this change?
For one, Chinese regulators are placing an increasingly strong emphasis on sustainability. In 2018, the country’s central bank released guidelines urging financial institutions to promote “green finance” and support projects that combat climate change.
There’s also a growing awareness among Chinese investors of the risks associated with environmental degradation and social inequality. A recent survey found that nearly 60% of Chinese investors believe that ESG factors can have a positive impact on financial performance.
What does this trend mean for the US?
“The rise of China as a global sustainable investment leader is a significant development,” said Simon O’Connor, CEO of the GSIA. “It is a sign that responsible investment strategies are becoming more mainstream and that investors are increasingly looking to integrate ESG factors into their decision-making.”
The rise of China as an ESG powerhouse could have major implications for the global economy. For one, it could spur more companies to adopt sustainable practices in order to attract Chinese investment.
It could also lead to more cooperation between the US and China on climate change and other environmental issues. Indeed, Beijing has already signalled its intention to work with Washington on green finance initiatives.
Of course, it’s still early days, and it remains to be seen how China’s ESG boom will play out in the long run. But one thing is clear: the rise of Chinese investment in sustainable companies is a trend that’s worth watching.