China through a sustainable investment lens

Home to the world’s second largest capital market, China is an increasingly attractive investment destination for global investors as the nation has gradually liberalised its capital account over the past decade. During the same period, the global investment community has undergone a sustainable investment (SI) revolution, propelling sustainability considerations to the forefront of many investment decision-making processes.

When speaking to many institutional investors about China allocations, ESG considerations often occupy a substantial part of the discussion. It is not unusual for enthusiasm to give way to some concerns and scepticism when the discussion moves from economic/return prospects to ESG.

In this two-part series we offer our thoughts on the most important questions that sit in the intersection of major sustainable investment trends and that are likely to shape global institutional investing for the decades to come.

Table of Contents

1. 01

   Part 1: The case for including China in a sustainability focused portfolio

   This part asks the question: “Does the investment case still hold for allocation to China if environmental, social and governance (ESG) characteristics of its assets are properly taken into account?”

   We believe the answer to this question is yes, and list out three main parts of our argument. Our aim is to address the common concerns and help institutional investors build a more informed understanding of China’s SI practice and its future outlook.

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2. 02

   Part 2: Incorporating ESG in portfolio design and implementation considerations

   This concluding part asks the question: “How should investors implement their China allocation to manage ESG-related risks, as well as exploring ESG-driven opportunities?”

   We lay out the way we incorporate ESG considerations while constructing a portfolio, and why skilled active management should be front and centre of any institutional solutions access to China.

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