Ping An Digital Economic Research Center (DERC)

Ping An - DERC

Ping An Digital Economic Research Center (DERC) utilizes more than 50 TB of high frequency data points, more than 30 years of historical data and more than 1.5 billion data points to drive research on the “AI + Macro Forecast” and provide insights and methods towards precise macroeconomic trends. 

Ping An DERC is a research center for Ping An Insurance (Group) Company of China, Ltd. (“Ping An”) is a world-leading technology-powered retail financial services group. With over 204 million retail customers and 534 million internet users, Ping An is one of the largest financial services companies in the world.

Ping An Digital Economic Research Center

Zheng Zeng

<blockquote>ESG Report Series Issue 4</blockquote>ESG investing has become a mainstream phenomenon for capital markets worldwide. Global flows to ESG-themed ETFs hit a record high in 2019, up to 3 times than that of 2018. During the pandemic in 2020, despite the outflow of traditional ETF funds, the market needs for ESG investing remains strong. The opening up of China's capital markets is also driving more international capital with ESG themes into China, promoting ESG and responsible investment philosophies to gain greater recognition in China. In addition, with stronger regulatory requirements for ESG disclosures and a broader guidance to build a "green financial system,” China has witnessed an increase in the quantity and quality of disclosures, as well as rapid growth of ESG investment in recent years. <ol>
<li>By conducting Natural Language Processing based analysis to detect themes discussed in 103 market wide third-party research reports, we find that there has been an increasing focus on ESG in the Chinese capital market, with a gradual transition from the initial conceptual descriptions to specific investment products and their performance.</li>
<li>The number of ESG indices has doubled in 2020 in China, with increased diversity in investment strategies and notable performance of quality factors.</li>
<li>The issuance of ESG fund products is undergoing a booming period, with “pure ESG” fund products that combine the entire dimension of ESG gaining momentum.</li>
<li>ESG fund products have performed well since the start of 2020, with returns above the market average for funds in China.</li>
<li>Recommendations and look ahead for ESG Investing in China:  • ESG ratings and data coverage in the domestic market need to be further enhanced to enhance alignment with the Chinese market to support the enrichment of ESG theme investment products.  • Alternative data and technology can help investors distinguish between companies that are truly ESG compliant and well performing vs. those who are not. • Establishment of ESG ratings and data for bonds and bond issuers is essential to accelerate integration of ESG in fixed income investment.  • Index providers and fund management companies should develop more diversified ESG products such as passive funds, quantitative funds, and investment products for the primary market, providing more investment options for investors.  • As China puts more emphasis on climate change, financial markets should proactively innovate and develop financial products to respond to the need of climate risk mitigation and transition into a low-carbon economy. </li>
</ol><div class="content-highlight">ESG investment trends in China in Charts</div><figure class="editor-figure mceNonEditable"><img src="https://static-prod.smartkarma.com/images/media/000/172/658/original/image_19643538131605767175083.png?1605767176" class="editor-image img-responsive" data-smartkarma-image-id="172658"></figure>

ESG Report Series Issue 4ESG investing has become a mainstream phenomenon for capital markets worldwide. Global flows to ESG-themed ETFs hit a record high in 2019, up to 3 times than that of 2018. During the pandemic in 2020, despite the outflow of traditional ETF funds, the market needs for ESG investing remains strong. The opening up of China's capital markets is also driving more international capital with ESG themes into China, promoting ESG and responsible investment philosophies to gain greater recognition in China. In addition, with stronger regulatory requirements for ESG disclosures and a broader guidance to build a "green financial system,” China has witnessed an increase in the quantity and quality of disclosures, as well as rapid growth of ESG investment in recent years. 
By conducting Natural Language Processing based analysis to detect themes discussed in 103 market wide third-party research reports, we find that there has been an increasing focus on ESG in the Chinese capital market, with a gradual transition from the initial conceptual descriptions to specific investment products and their performance.
The number of ESG indices has doubled in 2020 in China, with increased diversity in investment strategies and notable performance of quality factors.
The issuance of ESG fund products is undergoing a booming period, with “pure ESG” fund products that combine the entire dimension of ESG gaining momentum.
ESG fund products have performed well since the start of 2020, with returns above the market average for funds in China.
Recommendations and look ahead for ESG Investing in China:  • ESG ratings and data coverage in the domestic market need to be further enhanced to enhance alignment with the Chinese market to support the enrichment of ESG theme investment products.  • Alternative data and technology can help investors distinguish between companies that are truly ESG compliant and well performing vs. those who are not. • Establishment of ESG ratings and data for bonds and bond issuers is essential to accelerate integration of ESG in fixed income investment.  • Index providers and fund management companies should develop more diversified ESG products such as passive funds, quantitative funds, and investment products for the primary market, providing more investment options for investors.  • As China puts more emphasis on climate change, financial markets should proactively innovate and develop financial products to respond to the need of climate risk mitigation and transition into a low-carbon economy. 
ESG investment trends in China in Charts

China Treasury

ESG Investment in China