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Saturday, November 17, 2018

Despite Late Start, Experts See Big Future for Impact Investment in China

November 17, 2018. Shanghai – Nearly 400 faculty, students, and visitors from the business community gathered at CEIBS Shanghai Campus today for the Global Impact Investing Forum that explored topics such as trends in global impact investing and sustainable finance. It was one of a wider range of events and activities taking place this weekend as part of the 2018 CEIBS Alumni Reunion. As part of the forum, United Nations Social Impact Fund (UNSIF) Head Nan Li Collins moderated a panel which sought to tackle the question of whether or not China can become a leader in impact investing and sustainable finance.

Despite getting a late start when compared with other parts of the world, said EY China Head of Green Finance Judy Li, the story of impact investment in China has really been one of going from zero to hero. She also highlighted one of the biggest factors that has helped affect this change.

“Firstly, strong support in terms of policy from the government and from the Central Bank,” she said. “For example, the Chinese government recently selected eight districts in five provinces as pilot zones for issuing green bonds. [As part of these programmes,] local issuers receive subsidies from the government for the cost of issuing the bonds and investors are also given preferential treatment.”

Aegon Asset Management SVP and Global Head of Responsible Investments Harald Walkate offered a European perspective on the role of institutional investors and impact investment in China. Among other things, he noted the trend in adopting environmental, social, and governance (ESG) criteria when deciding which markets and sectors to move into.

“ESG has become very important for institutional investors. They’re trying to make good investments on behalf of their customers, so it means you do have to be creative,” he stated. “[As such,] institutional investors are interested in seeing what kind of ecosystem there is that they can participate in.”

When it comes to impact investment, however, one of the big questions which many observers have on their minds has to do with risk management. As UNIDO Goodwill Ambassador and Made in Africa Founder Helen Hai shared during the forum, at least part of the answer lies in the wave of new technologies being brought on by Industry 4.0.

“One thing we want to do is, we want to help people in less developed areas benefit from [impact investment],” she said. “In China, for example, there are about 6,000 foundations, but are they all transparent in their activities? In the future, blockchain technology can be used to ensure practices are more transparent and more impactful. [Blockchain] is also inclusive, so it means that everyone will be able to build a foundation using this technology.”

Nevertheless, despite recent advancements in financial technology and other areas, China Alliance of Social Value Investment and China Global Philanthropy Institute Chairman Ma Wei Hua said China still has a long way to go in terms of educating Chinese investors on different aspects of impact investing.

“We would really like to have a platform that can match project owners and capital owners as well as greater support for research,” he said. “As well, we don’t have standards on impact investment in China and we need intermediaries to come up with standards so investors can evaluate projects.”

Narada Foundation Chairman and China Social Enterprise and Impact Investing Forum Founding Partner Xu Yongguang added that one of the things project owners need to look for in investors is a willingness to maintain a long-term vision.

“On one hand, for social projects they take a little more time and you need to be a little bit more patient,” he explained. “On the other, they often have better ability to gather social resources because they usually operate in sectors which the government cares a lot about.”

Furthermore, when it comes to impacting investment in China, Harald Walkate emphasised the need for China to come up with a home grown approach to developing and maintaining an impact investment ecosystem.

“China can learn from Europe and the United States and we’re happy to work with China,” he said. “But at the same time you need to work it out in a way that works for China by working on business plans and being innovative and coming up with new investment tools. You have to do it in a way which works for China.”

Michael D. Thede
Charmaine N. Clarke