Investors Turn Focus on China’s Drive for Sustainability

(3BL Media/Justmeans) – Global investors are increasingly hesitant to invest in companies with a traditional growth model that fails to incorporate the principles of sustainability. Recognizing this trend, China is getting ready to shed off its historic burden as the world’s largest producer of CO2 emissions, with major Chinese companies implementing comprehensive measures to address the threat of climate change.

The government of China is leading the drive towards sustainability with an agenda to enforce stricter regulation, make massive investments in cleantech infrastructure, and commit to green finance with large spending pledges across the industries.

According to the consultancy ENEA, China is set to invest $2.2 trillion across six sustainability-focused sectors by 2020, an amount larger than India’s GDP in 2016. Renewable power, waste and water management, and measures to reduce air pollution will all receive sizeable investment. The country is already a world leader in clean energy assets, accounting for 30 percent of global investment in renewable energy and 27 percent in energy efficiency, as per the IEA World Energy Investment Report 2017.

Apart from investments, China is introducing a range of measures to incentivize the corporate sector to conduct business in a more sustainable way, with tough penalties to ensure companies take environmental regulation seriously. The upcoming carbon trading market, for instance, will penalize heavy polluters while rewarding the most sustainable peers.

Investors looking to participate in China’s drive towards a sustainable economy can take advantage of a growing range of index products that grants exposure to the green theme. The S&P New China Sectors Index, for example, removes old economy companies, leaving a selection of Chinese companies in new sectors such as technology and healthcare.

According to Yoram Layani, managing director and head of institutional sales, Asia ex-Japan, at BNP Paribas, one of the strengths of the S&P New China Sectors Index is that it not only adds ESG considerations into stock selection, but by focusing on new economy companies, it also addresses the problem with popular China benchmarks, which focus too much on older industrial companies that have not been attractive for some time.

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