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Market Opportunity for ESG Products - Demand and Supply
2020-12-16

As ESG and responsible investment gradually enters the mainstream practice of the financial market, various ESG financial products have entered the fast track of development in China. According to the "China Sustainable Investment Review 2020" released by SynTao Green Finance, by end of October 2020, China has a total of 127 pan-ESG mutual fund products with a total scale of more than 120 billion yuan, and 47 bank ESG wealth management products. The total scale is expected to exceed 23 billion yuan.


As ESG financial products becoming pilot practicefor responsible investment, the 8th China SIF Annual Conference invited a wide spectrum of global representative notable guests to the forum themes on "ESG Product Design and Innovation".

Frédéric Samama, Chief Responsible Investment Officer at CPR AM of Amundi Group, shared the innovation trend of financial products to support climate change actions. He also shared cases of international low-carbon equity indexes and green bond fund products supporting green infrastructure construction in emerging markets. Frédéric urged the awareness of climate change, and called for joint effort from asset owners, asset managers and service providers to integrate climate risk. 

Frédéric Samama, Chief Responsible Investment Officer, at CPR AM, Amundi Group [ONLINE]

Chen Yaqin, Division Chief of Green Finance Department in Head Office of Industrial Bank, shared the exploration of the systematic development of ESG products by commercial banks based on the practice of Industrial Bank. She said that ESG product system construction and innovation should not be limited to the product level, but should be a systematic work from strategic planning to product design. Industrial Bank formulated the overall ESG strategy of the group, and under the guidance of the strategy, explored the simultaneous development of ESG-themed business products in multiple business lines such as credit, investment banking, funds, leasing, and trust.

Chen Yaqin, Division Chief of Green Finance Department, Head Office of Industrial Bank

Dennis Fritsch, Project Coordinator of Sustainable Blue Economy Finance in UNEP FI, focused on the Sustainable Blue Economy Finance Principles. He urged the ocean continues to provide enormous benefits to both business and society and all the goods, services, and economic activities we derive from the ocean are estimated to be equivalent to the world's 7th largest economy in GDP terms. So far there are more than 50 financial institutions around the world joined the UNEP FI Blue Economy Financie Principles, including Industrial Bank and Bank of Qingdao. Recently, blue bond innovation has emerged in both the global and Chinese financial markets. The blue economy has high potential in financial innovation.

Dennis Fritsch, Project Coordinator, Sustainable Blue Economy Finance, UNEP FI [ONLINE]

The panel discussion was moderated by Zhang Rui, SynTao Green Finance Managing Director. Four representative guests conducted in-depth discussions on the development trend of global ESG products, the main target groups of ESG products and the rising market acceptance.

Parallel Forum B2: ESG Product Design and Innovation

Dr. Sun Mingchun, Chief Economist of Haitong International Securities Group Ltd, introduced the inflow of more than US$190 billion into global sustainable ETF funds in the first three quarters of this year, 100% of increase from last year, reflecting the rapid development of global market demand for ESG products. With the opening of China's financial market, overseas funds will also pay more attention to Chinese ESG products. However, it is necessary to increase coordination and balance between China's local and global standards in terms of making product strategy.

Yang Hai, Managing Director of Orient Securities Asset Management, emphasized on domestic asset management institutions that should fully integrate their own advantages and characteristics when deploying ESG product lines. Institutions with stronger sales and product development capabilities than active management are suitable for cooperating with ESG rating agencies or index companies to develop ESG characteristic index products; companies with strong active management capabilities may consider combining external data with the company’s existing investment process, making full use of the company's investment and research capabilities to design and develop active investment products with ESG themes. He especially emphasized that asset managers should avoid using ESG as a pure marketing method, but pay more attention to the actual product operation, investment goals, investment strategies, and compatibleness of performance benchmark.

Yan Xu, Chief Investment Officer of Hwabao WP Fund Management Co., Ltd, shared the innovation of ESG investment strategies and themes. She said that the ESG investment products that have emerged in China are more focused on thematic products, such as green, environmental protection, social responsibility, corporate governance funds, etc., and they are still in the infancy. The next step is to consider comprehensive ESG factors and carry out in-depth research on ESG integration strategies, hoping to make the company's ESG performance the same as the price-earnings ratio and price-to-book ratio as another important dimension of evaluating the company.

Zhang Dachuan, Executive Director of ESG Investment Department in Huaxia Wealth Management Co., Ltd, introduced the trend of the bank's ESG wealth management products. Hua Xia Bank first launched ESG wealth management products in China, which was recognized and accepted by public investors. Zhang Dachuan believes that ESG investment concepts should be explained to the public in "understandable and acceptable" ways. And through the early deployment of ESG products, long-term performance should be used to promote greater recognition of ESG investment products by institutions and the public.

The panelists agreed that ESG investment products have broad development prospects in China and require the joint efforts of regulatory agencies, asset owners, asset managers, and professional service providers. With the rising awareness of sustainable development in the whole society, the ESG investment market will usher in a golden period of development.

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