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27 Jul PBoC Deputy Governor States to Guide Pension Funds into ESG Investing
Deputy governor of PBoC, Fan Yifei, indicated that the central bank will guide pension funds and other long-term funds into ESG investing with an aim to diversify capital sources of the domestic green bond market, according to Xinhuanet on July 26. At the Global Wealth Management Forum 2021 Beijing Summit held on that day, in addition to promoting ESG investing, Fan also announced other measures of PBoC to facilitate green finance development in the country. Other targets include improving green finance standard system in alignment with international standards, strengthening ESG related information disclosure requirements, and improving the market ecology of evaluation and certification agencies.
Pension funds such as corporate annuities are one of the most important kinds of funds in China as it stands for the retirement assurance of the elder population. Considering this feature, the investment scope of pension funds is usually narrow compared to that of normal funds. At the end of 2020, the Ministry of Human Resources and Social Security (MoHRSS) released the latest notice to expand the investment channels of pension funds from only onshore financial products to H-share investments via equity pension products or equity mutual funds with an aim of risk diversification. As for PBoC to introduce ESG investing for pension funds this time, the move represented an acknowledgment of not only the concept of ESG by the Chinese government but also the potential of ESG investing.
ESG investing is attracting an increasing number of investors after Chinese President Xi Jinping announced the carbon neutrality goal by 2060 in September 2020. The number of ESG funds issued in China reached 159 by June 2021, amounting to RMB184.27bn in total. In the meantime, the return of ESG funds is also considerable. Citing statistics from Wind, by December 9, 2020, 101 ESG funds achieved positive returns with an average return rate of 45.18% and the highest standing at 90.93%.