China’s sustainability funds have tripled since launch of ‘dual carbon goals’, but concerns over disclosure requirements, investor education remain: Morningstar

Sustainable funds have experienced rapid development in the past few years, with significant growth in the number of products available and consistent annual net inflows, Morningstar analysts say in new report

Lack of public disclosures of ESG information a challenge for Chinese investors investing in sustainable funds

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China’s main stock markets, including that of Shanghai (above), released their first guidelines for listed companies to disclose their sustainability-related information in February, Morningstar says. Photo: AFP

Published: 6:35pm, 12 Mar 2024

The number of sustainability funds has tripled in mainland China since the world’s largest emitter of greenhouse gases pledged to reach peak emissions by 2030 and carbon neutrality by 2060, with local asset managers seizing opportunities arising from the green transition, US financial services firm Morningstar said.

Local asset managers have been actively expanding their sustainable product offerings since 2020, when President Xi Jinping announced China’s “dual carbon goals”, and such funds have also recorded consistent annual inflows, according to Morningstar’s China Market Observer report released on Tuesday.

The number of sustainable funds in China had tripled to 246 as of June 30 last year from 78 as of December 2020, according to the report. About 29 sustainable funds were launched in the first half of 2023.

“Investors’ awareness of sustainable investing is increasing amid the Chinese government’s promotion of a green transformation,” Morningstar analysts led by senior manager research analyst Jingxia Dai said in the report.

“Sustainable funds in China have experienced rapid development in the past few years, with significant growth in the number of products available and consistent annual net inflows.”

These funds received a net inflow of 31.7 billion yuan (US$4.4 billion) in the first half of 2023, which represented 6 per cent asset growth from the end of 2022, despite the challenging Chinese stock market, showcasing the growing popularity of such investments, Morningstar said.

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