ESG Movement Advances In China

ESG is not new to China, but now China’s government is actively engaging in this area.

China seems to be taking its 14th Five-Year Plan (released at the end of 2020) seriously, kicking off 2021 with a series of steps aimed at reducing the country’s carbon dioxide emissions by at least 65% by 2030 and achieving carbon neutrality by 2060. Here’s a rundown of progress so far:

  • In March, State Grid International Leasing Company issued asset-backed commercial paper (ABCP), China’s first asset securitization product designed to facilitate carbon neutrality. The RMB1.75 billion ($270 million) raised is supporting clean energy leasing projects in wind, hydro and photovoltaic power. Issued and managed by various Chinese trust companies, including State Grid-backed Yingda International Trust Co. and Bank of China, ABCP serves a larger role in encouraging a nationwide green finance movement and compelling Chinese financial institutions to engage with climate change.
  • Also occurring in March, China Development Bank (CDB), China’s top policy bank, issued China’s first “carbon neutrality” bonds, supported by Shanghai Clearing House. The three-year bonds were offered to global investors with an issuing size of RMB20 billion ($310 million). The funds will be used for green projects that reduce carbon emissions.
  • In order to provide investors with ESG-related analytical tools to measure investment targets, Chinese Securities Index Co. (CSI) in April launched a series of ESG-themed indexes, including CSI 500 ESG Indexes and CSI 800 ESG Indexes. CSI, a joint venture between Shanghai Stock Exchange and Shenzhen Stock Exchange, was established in 2005 and provides approximately 4,000 indices. The CSI 500 ESG Index is designed to cover only the top 80% of performers, which will help establish performance benchmarks.

ESG is not new to China, but now China’s government is actively engaging in this area. Given the size of its economy, China may be taking a leading role in global efforts.