Why China has yet to catch the wave of global responsible investing
A lack of understanding about the importance of ESG and its potential benefits is hampering its adoption among Chinese firms, according to the UN-backed Principles for Responsible Investment organisation
Too few of mainland China’s asset owners and investment managers have embraced the systematic integration of environmental, social and governance (ESG) factors into asset allocation decision making, according to the first China chief of Principles for Responsible Investment (PRI), a body set up to promote sustainable investing.
Insufficient understanding of the merit and importance of responsible investing and a general reluctance by companies to volunteer information on their investment practices could mean missed opportunities to improve risk management and enhance investment performance, said Beijing-based Luo Nan of the United Nations-supported non-profit organisation.
“The major decision makers I have met so far have shown a general conceptual appreciation of the merits of ESG information disclosure and using the information for investment decisions, but their grasp on how they should be executed is far from enough,” Luo told the South China Morning Post in an interview.
“They are concerned that including ESG factors into investment decisions may negatively affect returns and restrict their investments … many also do not feel comfortable disclosing information on their progress on this front.”
The 12-year old PRI is funded by almost 1,900 asset owners and professional investor “signatories” globally with combined assets under management of over US$70 trillion. They include New York-based BlackRock – the world’s largest asset manager, and Japan’s Government Pension Investment Fund, which is the world’s largest pension fund.