China’s investors give more weight to ESG funds

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Mainland investors put higher-than-expected emphasis on including ESG in fund offerings, according to an investor survey.

When selecting a fund manager, mainland Chinese investors put particular emphasis on brand credibility, performance and multi-channel communications, according to a survey by Fleishman Hillard. But environmental, social and governance (ESG) capabilities were also cited by the majority of respondents as a requirement.

“ESG themes are on the rise for mainland investors,” according to the report, which was based on an August online survey of 250 Chinese investors and investment professionals.

“While the most important capabilities of a fund manager are transparency in communications, sophisticated risk management and transparent fee disclosure, 52% of respondents said ESG expertise is a very important requirement for fund managers, with 94% overall considering it either very or somewhat important.

“While not top of the list of key qualities, the interest in ESG was far higher than expected. It points to the immense potential for sophisticated global firms to conquer thought leadership in this space based on their global expertise,” the report added.

Source: Fleishman Hillard

However, ESG investing in mainland China is largely driven by international investors, as domestic fund managers and institutions are still trying to understand the concept. The lack of historical and quality data is a barrier to integrating ESG factors into the investment process in mainland China, FSA previously reported.

In 2017, the China Securities and Regulatory Commission (CSRC) and the country’s Ministry of Environmental Protection introduced new regulations that will require all listed companies and bond issuers to disclose ESG risks associated with their operations by 2020.

Separately, the survey found that among the ancillary services investors want from foreign asset managers, performance reporting ranked the highest, followed by investor education.

Another question found that online channels were the second most popular way that mainland investors buy funds. The finding suggests foreign asset managers in China will need a digital strategy to best address the retail market, the report said.

 

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