China’s sustainable funds post huge inflows amid push to meet carbon targets, Morningstar says

Net inflows into China’s sustainability-themed funds reached US$7.6 billion in the third quarter versus a net outflow of US$928.9 million in the second quarter

Overall, assets under management of ESG funds in China hit US$47.5 billion in the third quarter, up 33 per cent from the previous quarter

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An increasing number of investors in China are showing an interest in environmental, social and governance factors. Photo: AFP

Published: 5:30pm, 8 Nov 2021Updated: 8:49pm, 8 Nov 2021

Interest in sustainable investing is growing in China, as investors seek funds related to environmental, social and governance (ESG) factors amid Beijing’s push to meet its carbon goals, according to Morningstar.

Net inflows into sustainability-themed funds in the mainland grew to US$7.6 billion in the third quarter, reversing from a net outflow of US$928.9 million in the second quarter, according to the asset manager’s tally of 127 domestic funds with a strong focus on ESG factors.

“In 2021, investors have shown growing interest in ESG funds, particularly in renewable energy and low carbon products, as the Chinese government continues its efforts to meet commitments to hit peak emissions by 2030 and achieve carbon neutrality by 2060,” Verna Chen, a Shenzhen-based analyst in Morningstar’s manager research team, told the Post.

Some 20 ESG funds were launched in China in the third quarter, out of 34 such funds in Asia ex-Japan. Most of the funds launched on the mainland focused on climate-related themes, in line with the government’s efforts to meet its carbon emissions reduction targets, according to Morningstar. This included the initiation of a national carbon trading market in July, which resulted in strong investor interest in new energy and low carbon products in the mainland, the research firm said.

“As one of the hottest themes this year, renewable energy stocks have surged since the second quarter of 2021, leading many funds investing in related areas to outperform the market, some of which have attracted significant inflows year to date,” said Chen.

Overall, assets under management of ESG funds in China reached US$47.5 billion in the third quarter, growing 33 per cent from the previous quarter.

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