(Bloomberg) — Every Thursday at 9:00 p.m. for the past two years, around a dozen Chinese finance veterans and regulators have held a video call to talk about pushing the nation’s companies to meet environmental, social and governance standards. This was supposed to be the year their efforts paid off.
ESG investing deploys more than $30 trillion worldwide, but the vast majority of Chinese companies don’t report enough data to show whether they qualify for the funds. Officials have said they’ll make it mandatory this year for the nearly 4,000 listed companies in the country to publish ESG metrics, potentially attracting trillions more into the country.
“After years of laying the foundations, we hope 2020 will be the year that ESG investing takes off in China,” said Angela Bai, executive director of the China Alliance of Social Value Investment, which established the Thursday meetings.
But with companies struggling to overcome the economic effects of the coronavirus and a trade war with the U.S., that may be optimistic. Even before the pandemic, stock exchange officials told Bloomberg News in November that regulators had yet to give them guidelines on how companies should report ESG metrics. The Shenzhen exchange said last week it has no new information to disclose on the progress of mandatory disclosure. The Shanghai exchange did not respond to questions about the proposed changes.
The impact of the virus has taken precedence over issues such as sustainable investing, said Helena Fung, head of sustainable investment in Asia Pacific at FTSE Russell. “Investors will be watching closely to see whether a mandatory reporting framework will be sufficiently robust to increase reporting standards,” she said.
Without enforced rules, most companies don’t think the benefits of being able to tap ESG funding justify the extra work. China’s stock markets are dominated by retail investors who are used to wild swings and typically seek fast returns, especially from new listings. That means companies have been able to raise funds without having to publish information about sustainability.
“Many companies simply aren’t aware of the benefits of disclosure and don’t see why they should take on the extra cost,”said Guo Peiyuan, chairman of SynTao Green Finance, a Beijing-based ESG data provider.
Model Outperforms
An ESG investing model developed by CASVI outperformed China’s benchmark index by over 4 percentage points annually over a five-year period, but in a market where funds can outperform the market several times over in the short term, steadiness is not always an easy sell.
Chinese investors also aren’t used to thinking about profit and social value together, said Wang Deying, deputy general manager of Bosera Funds, which worked with CASVI to create a sustainable-investing exchange-traded fund that raised nearly 1.5 billion yuan ($212 million) in January.
Bosera’s ETF found an audience with some of China’s largest banks and insurers, but it will take time for more investors to come around, said Wang. “People are used to making a profit, then using some of those profits to support social causes, not putting the two together in one decision,” he said.
While the Chinese government has been a strong proponent of impact investing, turning the nation into the world’s biggest issuer of green bonds, it has lagged behind Asian counterparts like Japan and Australia in establishing a framework for firms to report ESG data. By June 2019, only 0.13% of the over 13 trillion yuan in mutual fund assets under management in China were ESG funds, according to data compiled by CASVI.
“Data availability and accuracy have been a big challenge,” said Bai. “We initially wanted to evaluate all Chinese listed companies, but it was basically impossible.”
Instead, CASVI limited its model to the benchmark CSI 300 index of mostly large-cap firms. Even there, discrepancies still emerge after cross-checking company data with authorities such as the patent office and Environmental Protection Bureau, or non-profits like the Institute of Public & Environmental Affairs, Bai said. Often data is released by companies in the form of shiny “corporate responsibility reports” instead of statements that are subject to regulatory scrutiny.
No Shame
CASVI, one of the first non-profits in China to advocate for ESG investing, also has to navigate a complicated relationship with the government and powerful state-run companies, according to Bai, The organization has rejected explicit government support, and, while CASVI’s model ranks companies on the CSI300 from best to worst, its report only includes the names of the top 99 to avoid publicly shaming those who underperform.
But pressure is growing for more robust reporting, especially after Chinese shares were added to global indexes compiled by MSCI Inc. and FTSE Russell, which also rates companies based on ESG metrics.
Solar power company LONGi Green Energy Technology Co. said they started to publish more ESG measures after a poor rating from MSCI Inc., which gave the firm a score of zero for categories for which they did not disclose data.
There are now 45 funds and service providers in China that have formally adopted the Principles for Responsible Investment, up from six three years ago. A recent joint report by PRI and the CFA Institute found Chinese asset managers are increasingly incorporating ESG factors in their investment analysis and that overseas demand has been a major driver for the sector.
“People are clearly becoming more passionate about the concept,” Bai said.
TORONTO – Canada’s main stock index was down more than 200 points in late-morning trading, weighed down by losses in the technology, base metal and energy sectors, while U.S. stock markets also fell.
The S&P/TSX composite index was down 239.24 points at 22,749.04.
In New York, the Dow Jones industrial average was down 312.36 points at 40,443.39. The S&P 500 index was down 80.94 points at 5,422.47, while the Nasdaq composite was down 380.17 points at 16,747.49.
The Canadian dollar traded for 73.80 cents US compared with 74.00 cents US on Thursday.
The October crude oil contract was down US$1.07 at US$68.08 per barrel and the October natural gas contract was up less than a penny at US$2.26 per mmBTU.
The December gold contract was down US$2.10 at US$2,541.00 an ounce and the December copper contract was down four cents at US$4.10 a pound.
This report by The Canadian Press was first published Sept. 6, 2024.
TORONTO – Canada’s main stock index was up more than 150 points in late-morning trading, helped by strength in technology, financial and energy stocks, while U.S. stock markets also pushed higher.
The S&P/TSX composite index was up 171.41 points at 23,298.39.
In New York, the Dow Jones industrial average was up 278.37 points at 41,369.79. The S&P 500 index was up 38.17 points at 5,630.35, while the Nasdaq composite was up 177.15 points at 17,733.18.
The Canadian dollar traded for 74.19 cents US compared with 74.23 cents US on Wednesday.
The October crude oil contract was up US$1.75 at US$76.27 per barrel and the October natural gas contract was up less than a penny at US$2.10 per mmBTU.
The December gold contract was up US$18.70 at US$2,556.50 an ounce and the December copper contract was down less than a penny at US$4.22 a pound.
This report by The Canadian Press was first published Aug. 29, 2024.
The crypto market has recently experienced a significant downturn, mirroring broader risk asset sell-offs. Over the past week, Bitcoin’s price dropped by 24%, reaching $53,000, while Ethereum plummeted nearly a third to $2,340. Major altcoins also suffered, with Cardano down 27.7%, Solana 36.2%, Dogecoin 34.6%, XRP 23.1%, Shiba Inu 30.1%, and BNB 25.7%.
The severe downturn in the crypto market appears to be part of a broader flight to safety, triggered by disappointing economic data. A worse-than-expected unemployment report on Friday marked the beginning of a technical recession, as defined by the Sahm Rule. This rule identifies a recession when the three-month average unemployment rate rises by at least half a percentage point from its lowest point in the past year.
Friday’s figures met this threshold, signaling an abrupt economic downshift. Consequently, investors sought safer assets, leading to declines in major stock indices: the S&P 500 dropped 2%, the Nasdaq 2.5%, and the Dow 1.5%. This trend continued into Monday with further sell-offs overseas.
The crypto market’s rapid decline raises questions about its role as either a speculative asset or a hedge against inflation and recession. Despite hopes that crypto could act as a risk hedge, the recent crash suggests it remains a speculative investment.
Since the downturn, the crypto market has seen its largest three-day sell-off in nearly a year, losing over $500 billion in market value. According to CoinGlass data, this bloodbath wiped out more than $1 billion in leveraged positions within the last 24 hours, including $365 million in Bitcoin and $348 million in Ether.
Khushboo Khullar of Lightning Ventures, speaking to Bloomberg, argued that the crypto sell-off is part of a broader liquidity panic as traders rush to cover margin calls. Khullar views this as a temporary sell-off, presenting a potential buying opportunity.
Josh Gilbert, an eToro market analyst, supports Khullar’s perspective, suggesting that the expected Federal Reserve rate cuts could benefit crypto assets. “Crypto assets have sold off, but many investors will see an opportunity. We see Federal Reserve rate cuts, which are now likely to come sharper than expected, as hugely positive for crypto assets,” Gilbert told Coindesk.
Despite the recent volatility, crypto continues to make strides toward mainstream acceptance. Notably, Morgan Stanley will allow its advisors to offer Bitcoin ETFs starting Wednesday. This follows more than half a year after the introduction of the first Bitcoin ETF. The investment bank will enable over 15,000 of its financial advisors to sell BlackRock’s IBIT and Fidelity’s FBTC. This move is seen as a significant step toward the “mainstreamization” of crypto, given the lengthy regulatory and company processes in major investment banks.
The recent crypto market downturn highlights its volatility and the broader economic concerns affecting all risk assets. While some analysts see the current situation as a temporary sell-off and a buying opportunity, others caution against the speculative nature of crypto. As the market evolves, its role as a mainstream alternative asset continues to grow, marked by increasing institutional acceptance and new investment opportunities.
