Chinese index ranking companies by social value commitment aims to help ethical investors
China Alliance of Social Value Investment says its Social Value 99 index outperformed traditional benchmark stock indices in a simulation
A Chinese non-profit organisation with founders including state-backed poverty alleviation group YouChange, the United Nations Social Impact Fund and Tsinghua University, is offering what it says is the first index to measure the social value competency of Chinese companies, in a boost for ethical investing.
China Alliance of Social Value Investment’s (Casvi) Social Value 99 index evaluates the social value of a company based on whether it has clearly defined, targeted social issues in its core business model, and whether it has effectively addressed them through innovative solutions, said Wang Yijing, Casvi’s director of strategic partnerships.
“Our criteria tells a company that you cannot make up the bad things you did with some good activities. The standard looks at all aspects of the business in a very comprehensive manner,” Wang said.
Social and ethical investing has taken off in many developed markets, for example in the US, where companies can register with the B-Corporation to obtain certification for providing value to employees, the local community and the environment.
But a lack of information about Chinese companies has made it difficult for many ethical investors to enter the country’s financial markets.
Wang said however that Chinese policies aimed at “quality” economic growth have led to a gradual shift in investors’ focus toward social value and impact investing.
China’s President, Xi Jinping, laid out plans at the 19th Party Congress in October to promote green development, tackle pollution and implement more robust regulations to protect the environment.
Wang said the 99-member index gained 35 per cent to 1,505.53 points in a simulation test based on data from June 2016 and November 2017, which meant it would have outperformed gains of between 7 per cent and 22 per cent in the traditional benchmark Shanghai Composite, SSE 50 and CSI 300 indices in the same period.
The heaviest weighted companies in the index, which have the best performance in each criteria, include China State Construction Engineering Corp, China Yangtze Power and Zhejiang Chint Electrics.
All 99 companies in the index can be traded by international investors through the Shanghai and Shenzhen stock connect schemes.