From the General Manager of China Southern Asset Management Co., Ltd.
BEIJING (ACN Newswire) -
Yang Xiaosong, General Manager of China Southern Fund, was asked to deliver the keynote speech at the first ESG Global Leaders Summit on August 26, sponsored by Sina Finance ESG Channel and CITIC Publishing Group, in Beijing. The Summit presented an opportunity to meet with global regulatory, business, investment and academic circles to discuss the future of ESG. The topic Yang chose to address, The Road to Carbon Neutrality for Institutional Investors.
"Faced with the increasingly severe challenges of the climate crisis, China pledged to achieve a peak in its carbon dioxide emissions before the year 2030 and carbon neutrality before the year 2060 at a United Nations climate summit last year. As the largest developing country in the world, China's active promotion of peak emissions and carbon neutrality not only demonstrates the broad-minded sense of responsibility of a major nation but points to the direction of a green transformation of China's economy and society in the realization of sustainable development.
Peak emissions and carbon neutrality will promote structural change in the economy and society, including energy consumption, the industrial structure, and the patterns of relative economic growth. In this process, professional investment institutions will give full play to their function of optimizing resource allocation and provide long-term funding sources for green, low-carbon, high-quality enterprises. At the same time, the carbon-neutral value chain presents immense investment opportunities, and professional investment institutions can generate returns for investors and create value for society by staking their presence in the new opportunities for industrial upgrading and technological breakthroughs.
As a leading institutional investor in China, Southern Asset Management attaches great importance to the research and practice of sustainable development finance. It joined the UN Principles for Responsible Investment (UNPRI) as early as 2018 and has taken the lead in establishing an ESG management structure. It has built ESG evaluation and investment systems, practises active shareholder strategies, and explores giving full play to the guiding role of the investment side in the real economy. Peak emissions and carbon neutrality are integral to ESG investment, and we believe the following explorations can be made with regards to ways in which institutional investors can promote the goal of peak emissions and carbon neutrality:
Firstly, carbon emissions databases can be built with the help of financial technology.
Carbon emission data is an infrastructure with which the financial industry gauges the climate change risks faced by businesses, and it is also an essential part of asset revaluation. Public equity funds require big data collection to conduct more comprehensive and three-dimensional analyses of investment targets and fully integrate carbon emission databases with active research. However, in reality, the ESG information disclosure data of companies in China is incomplete. As of May 2021, only 1,092 or 25% and 149 or 3.6% of listed companies in the country actively disclosed their ESG data and carbon footprint data, respectively (according to the 2020 Statistical Research Report on Information Disclosure by A-share Companies and the 2021 Analysis Report on A-Share Companies' Information Disclosure with Respect to Climate Change Response). In this regard, we have compiled, through external data collection, financial technology and algorithms, a carbon emission database of all A-share companies which total more than 4,000, forming the basis for our in-depth research and investment.
Secondly, investment frameworks can be optimized to reduce the carbon footprint of asset portfolios.
With the opening of the national carbon trading market, internalization of the social costs incurred by enterprises using a clear carbon pricing mechanism also provides us with an important reference for repricing the risks and returns of enterprises. It can be expected that with the improvement of the carbon credit allocation mechanism, the impact of carbon trading on asset prices will gradually increase. In the past year, Southern Asset Management has drastically reduced its investment ratio of high-polluting and high-energy-consuming enterprises, and the weighted average carbon emissions of its stock portfolio has fallen by more than 40% (based on internal data).
Thirdly, the supply of products can be enriched to promote the research and development of carbon emission products.
Public equity funds help investors partake in the growth dividends of carbon-neutral industries through investment strategies and product research and development. For example, based on our research on the carbon emissions of the constituent stocks of the CSI 300 in the past decade, the strategy of low-emission constituent stocks began to gradually generate abnormal returns in 2016, and such returns have increased significantly since 2019. Furthermore, with technological progress, technological upgrading and energy efficiency improvement centering on carbon neutrality going forward, new energy can be expected to become a long-term investment direction. At the product level, we have rolled out the China Southern ESG Theme Equity Fund, the China Southern CSI New Energy ETF Feeder Fund, and the China Southern New Energy Industry Trend Hybrid Funds.
Fourthly, improvement of carbon emissions management systems needs to be undertaken as part of social responsibility fulfilment.
Southern Asset Management has established an internal carbon emission management system to account for its carbon emissions in accordance with internationally accepted standards. Its headquarters building has attained LEED Gold Certification for energy saving and emission reduction buildings. In addition, through Verified Carbon Units (VCUs) and an International Renewable Energy Certificate (I-REC), it has achieved full offset of the direct and indirect carbon emissions from its operations, attaining carbon neutrality of its operating system in July 2021.
Fifthly, ecosystem building can be undertaken to continuously enhance ESG influence.
We promote ecosystem building on various fronts. Firstly, we are a member of Climate Action 100+. By practicing active shareholder strategies, we are committed to promoting the emission reduction and transformation of 161 major greenhouse gas emitting companies around the world. Secondly, we have released the first domestic annual ESG investment report for public equity funds this year, improving the transparency of ESG investment with greater information disclosure and promoting the development of the industry. We are also a signatory member of the Task Force on Climate-Related Financial Disclosures (TCFD), engaging in detailed environmental information disclosure in accordance with international standards in the annual ESG investment report.
Peak emissions and carbon neutrality are a complex, long-term and systematic endeavour. As we move towards a "zero-carbon future", Southern Asset Management has its sights firmly set on the goals of peak emission and carbon neutrality, and it is committed to providing more efficient and professional financial services for green and low-carbon development with its asset management origins.
We strive to work with all partners to build a promising future in which green means economic advancement and man and nature coexist in harmony.
China Southern Fund Management Co., Ltd. General Manager Yang Xiaosong August 26, 2021
As a leading mutual fund in China, Southern Asset Management honors its social responsibilities. Apart from taking an active part in environmental protection and public welfare programs, it fully integrates ESG into its operation and investment. Southern Asset Management is a signatory of UN Principles for Responsible Investment and a member of the China ESG Leaders Association and the Climate Action 100+. It was among the first to launch an ESG Equity Fund in China to encourage ESG investment across the country. Its ESG efforts have been widely recognized, as evidenced by the honors it has received over the years, including the China ESG Golden Awards by Sina.com, the Evergreen Award by Caijing and the China Green Finance Award by Asiamoney.
