The ESG Phenomenon: Cerulli Associates, China

Editorial Staff, 13 January 2022


Developments in and around the ESG investment space.

Cerulli Associates
COVID-19 has turned up the heat on acceptance of environmental, social and governance-themed (ESG) investing in China, according to analytics and research firm Cerulli Associates.

While China is criticised for its record on human rights and building coal-fired power stations, for example, the US-based firm said that ESG-integrated funds and sustainability-related thematic funds grew in the country during 2020.

Excluding money market funds, total ESG mutual fund and exchange-traded fund assets under management more than tripled in 2020 to reach $28.5 billion, while net inflows reached $10.5 billion, Cerulli said in a report. 

(This news service has a new programme, its Wealth For Good Awards 2022, designed to highlight the work wealth managers are doing to drive change around the environment, society and governance. To find out more about the awards, click on this link. Submissions close on 4 February. Winners, finalists and commended entries will be celebrated in May this year.)

“Onshore managers intend to give ESG strategies high priority when promoting products to retail-oriented distributors over the next few years. Some managers told Cerulli…the COVID-19 pandemic has enhanced the public’s social responsibility awareness and made more investors consider ESG strategies,” the firm said.

China’s ESG market saw an expansion in product variety in 2020. Commercial banks and banks’ wealth management subsidiaries issued 13 ESG-themed wealth management products garnering assets of RMB12.3 billion ($1.93 billion) in 2019, 44 ESG-themed wealth management products in 2020 raising assets of RMB21.2 billion, and 21 ESG-themed WMPs for the year ended July 2021.

Retail investors in China “express limited demand for ESG adoption,” Cerulli said with ESG-based investing ranked as the second-least important product feature sought by them. 

However, a detailed look at the top 10 ESG funds by AuM between 2019 and June 2021 shows that the proportion of retail investors outweighed that of institutions in all the 10 funds. For example, individuals held more than 90 per cent each of the biggest sustainability-related thematic fund, ChinaAMC Energy Innovation Equity fund, and the biggest ESG integration fund, Zhong Ou Responsible Investment Allocation, as of June 2021, according to Eastmoney statistics.

The report added that ESG investing has “yet to become mainstream in China.”

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