Investors shun Chinese ESG funds in first quarter as markets take a beating on lockdowns, recession fears, Morningstar says

Name: Two sessions: How China's environmental policies are giving a boost to green industries
Uploaded: 2022-05-12T02:50:18.000Z
Duration: 3 min 26 s
Description: Two sessions: How China's environmental policies are giving a boost to green industries

Net inflows into China’s sustainability-themed funds sank 95 per cent to US$214.9 million in the first quarter from US$4.1 billion in the fourth quarter of 2021

Assets managed by ESG funds in China fell 14 per cent quarter on quarter to US$48.8 billion in the first three months of the year

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Inflows into ESG-themed market funds slowed in the first quarter amid market volatility. Photo: Reuters

Martin Choi

Published: 10:50am, 12 May 2022

Chinese investments in funds with a sustainability focus plunged in the first quarter amid pessimism and volatility in the markets, according to Morningstar.

Net inflows into China’s sustainability-themed funds slumped 95 per cent to US$214.9 million in the first quarter compared to US$4.1 billion in the fourth quarter of 2021, according to the asset manager’s tally of 152 domestic funds with a strong focus on environmental, social and governance (ESG) factors.

That was the lowest level since the second quarter of last year, when there was a net outflow of US$928.8 million from ESG funds in China.

“Investors in China were very pessimistic about the overall market environment in the first quarter,” said Rachel Wang, Morningstar’s director of manager research for China in an interview. “Under these circumstances, it’s very difficult for capital to flow into [ESG] funds.”

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Two sessions: How China's environmental policies are giving a boost to green industries

The CSI 300 Index, which tracks the 300 largest listed companies in mainland China, had its worst three months since the third quarter of 2015. Stock losses have deepened this year amid recession fears as Covid-19 lockdowns upended supply chains and forced factories to suspend operations.

Overall, assets under management of ESG funds in China fell 14 per cent to US$48.8 billion in the first three months of the year compared to the previous quarter.