Chinese institutional investors are capitalizing on China's prospects within the realm of climate solutions
In a significant stride towards sustainable investing, half of Chinese investors have integrated climate factors into their investment policies, achieving this target six years ahead of schedule. This development, according to recent research, places China at the forefront of global efforts to address climate change.
Many of the current climate solutions behemoths can trace their roots to China's stock market boom in the early 2000s. These companies, now key players in the renewable energy sector, continue to attract investment from a growing number of Chinese investors.
One such fund is Robeco's Chinese Equities Fund, classified as an Article 8 fund under the EU's SFDR regulation. This classification indicates that the fund's portfolio management promotes environmental factors.
BlackRock, another prominent global investment firm, offers exposure to Chinese transition opportunities through its China Environmental Tech Fund. The fund's largest holdings include Chinese battery manufacturer CATL and electric vehicle manufacturers XPeng and BYD.
AIGCC's research surveyed 30 institutional investors across China with a collective US$19.7 trillion in assets under management (AUM). The research shows that 73% of investors in China now recognize the financial materiality of climate change.
The integration of climate change is now considered 'mainstream' by these investors. Asset managers in China, such as Invesco Great Wall Fund Management, are shaping their climate offerings around these mandates. Su Yingying, head of ESG research at Invesco Great Wall Fund Management's investment department, recognizes the role of the institution in supporting clients with investment objectives to contribute to China's climate goals and capture opportunities in climate solutions.
The mandates of asset managers in China provide a catalyst for investment decisions and stewardship practices that will help accelerate China's climate transition. Asset owners, as stewards of capital, are positioned to be the best drivers of climate action, according to Mikula-Wright, AIGCC chief executive.
However, recent research by Global Energy Monitor (GEM) and Centre for Research on Energy and Clean Air (CREA) estimates that in the first half of the year, China commissioned nearly 25GW of coal power, bringing the number of new and revived coal power projects to their highest level in a decade. For investors integrating climate materiality into their portfolios, the future trajectory of coal power commissioning figures will be crucial.
Despite this challenge, the climate solutions opportunity set is visible in the funds on offer, often through the listed equities channel. Chinese institutions that have integrated climate factors into their investment policies for their combined AUM of USD 19.7 trillion include major state-owned banks, insurance companies, and sovereign wealth funds, such as the China Investment Corporation and the National Social Security Fund. These institutions increasingly incorporate environmental, social, and governance (ESG) criteria and climate-related risks as part of their investment decision-making.
Rebecca Mikula-Wright, AIGCC chief executive, encourages the performance of Chinese investors in climate action. As the world looks to China to lead the way in addressing climate change, these institutional investors are demonstrating their commitment to a sustainable future.
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