Sustainable Investment in China Newsletter | Q1 2010

In the past, it was rare that financial institutions considered “extra-financial” matters—such as corporate governance and climate change—relevant to investment decisions. Modern responsible investors argue that companies that take into account and manage the full range of risks and opportunities, including ESG issues, are best able to deliver long-term value for investors. Responsible investment is clearly on the rise, perhaps most obviously indicated by the number of mainstream investors now signed up to the PRI. In just three years, over 600 investors from five continents, representing around US$18 trillion in assets, have adopted and started implementing the principles.

The first of the six PRI principles requires investors to “incorporate ESG issues into investment analysis and decision-making processes.” Signatories often cite this as the most difficult principle to put into practice because the process can be different depending on to which sector, asset class, and region each investment decision pertains. For example, how valuable is a company’s management of its supply chain? Or how might a company’s high carbon emissions affect its share price over the long term? Each investor will have to develop its own process to assess the materiality of ESG issues.

Implementation examples of Principle 1 include the development of ESG-related tools, metrics, and analysis, training for trustees and investment professionals in ESG issues, and, in the case of asset owners, assessment of investment managers' capacity to incorporate ESG issues into investment decisions. Signatories often use specialized ESG research to inform their decisions, and with this in mind, the PRI Initiative recently created the "Enhanced Research Portal," a free online directory for signatories that provides an overview of ESG research in the market and supports the implementation of Principle 1.

The PRI Initiative is the first time institutional investors, fund managers, and professional service partners have developed a truly international and mutually supportive framework within which to consider and take action on the most important and material ESG issues. It is inevitable that investors will recognize and act on ESG issues over the long term, as these issues are clear drivers of long-term value. As an investor-led initiative, we welcome any Chinese investors that want to sign up to the PRI.

For more information, please contact Narina Mnatsakanian at narina.mnatsakanian@unpri.org.

• China to Cut 40 to 45 Percent GDP Unit Carbon by 2020

  Achieving this target will require efforts beyond energy saving and emissions reductions. According to a statement by the State Council, the Chinese government will need to dedicate major efforts to developing renewable and nuclear energies that ensure that the consumption of non-fossil-fuel power accounts for 15 percent of the country's total primary energy consumption by 2020.

• China Considering Carbon Tax

  If a proposal from a Chinese energy research institute wins political support, China could launch a tax on greenhouse gas emissions in approximately four to five years.

• China Tightens Corruption Supervision

  The personal lives and family information of senior officials in China will be put under tighter supervision as the top anti-graft body of the ruling Communist Party of China (CPC) vows a harsher fight against corruption.

• The China Greentech Report 2009 Launched at the World Economic Forum Annual Meeting

  The report examines 125 existing and emerging green tech solutions across seven sectors. It evaluates each solution's potential environmental impact as well as commercial opportunity. The report is the culmination of a research process led by a 30-person team that inspired significant contributions from hundreds of companies.

• The Second Annual FT Investing in a Sustainable Future International Conference | March 24, 2010, New York

  The top minds in today's corporate, financial, and investment arenas will gather at this conference to learn how investors are using new techniques to generate returns on responsible investments, and hear about the latest trends in CSR activities.

• The Third International Forum on China Environmental Investment | March 25-26, 2010, Beijing

  Hosted by the School of Environmental Science and Engineering at Tsinghua University, the China Environmental Investment Union, and the China Environmental Investment Network, this event will focus on environmental policy, markets, and investment.

• IFC’s 12th Annual Global Private Equity Conference in Association With EMPEA | May 11-12, 2010, Washington, D.C.

  The IFC's 12th Annual Global Private Equity Conference will explore key trends in emerging markets private equity, a sector in which the IFC and its partners are playing a crucial role.

• TBLI Conference Asia 2010 Call for Presentations and Sponsorship | May 27-28, 2010, Tokyo

  The largest annual comprehensive learning and networking event on ESG investment in Asia and Europe is now accepting presentation proposals and sponsorship commitments.