When it comes to economic growth, China is on a mission to tilt from quantity to quality. This runs parallel to the leadership’s ambitions to reach carbon neutrality by 2060.

If ESG is a critical ingredient in making this ambition a reality, then active asset managers have an opportunity to add value by meaningfully incorporating ESG criteria into their strategies.

China is a key actor in terms of achieving global climate goals. This in turn is important for global asset managers’ wider strategies, given that a successful global ESG portfolio will require exposure to Chinese assets – which look likely to grow, given China’s commitment to technology.

However, ESG is still in its nascent stages in China; and while consistent data points make things like environmental risks easier to manage, there are also – as panellists on our China roundtable highlighted – “hyper-specific issues like forced labour and human rights abuses of the Uighur Muslim population”, concerns around government involvement in companies with a significant footprint and an incomplete understanding of ESG to contend with.

While challenges exist, the pace of change in China is arguably the fastest on Earth. When combined with its encouragement of foreign participation in its capital markets, this should help develop and elevate ESG standards, as well as improve efficiency.

Romil Patel International and ESG Editor

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