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China will fuel the next wave of ESG investment as the region focusses on reputation

Private wealth in China has historically been less moved by ESG trends, but that is about to change. Recent research found that 64 percent of fund managers across the Asia region said they were planning to roll out ESG funds over the next few years.

Offshore Wind Turbines Farm At sunset

Private wealth in China has historically been less moved by ESG trends, but that is about to change.

We are already starting to see Chinese entrepreneurs and investors focus more on the ethical credentials of their businesses and investments.

Recent research found that 64 percent of fund managers across the Asia region said they were planning to roll out ESG funds over the next few years. The rise of Asian wealth flocking to sustainable investments has also been reported as one of the core reasons for the buoyancy of HSBC’s Asian wealth business.

This is being driven by two core trends, which will only intensify over the coming 12-to-24 months.

Firstly, as China’s economy continues to mature from an emerging market to a developed economy, it is natural that entrepreneurs will start to focus on metrics beyond profitability. This has been further aided by the increasing role that younger family members are starting to play in Chinese businesses.

This trend is further amplified by the increasingly globalised world. Wealthy individuals in China no longer exist in a vacuum-packed localised economic silo — but socialise and do business deals in North America and Europe, where trends and attitudes about wealth, impact, and ESG percolate and spread.

But, more importantly, China is going through a period of economic and business change. The Communist Party has recently stated its ambition to do more to redistribute wealth to ensure that the country works in the interests of all people.

In fact, notes from a recent meeting of the Communist Party’s Central Committee for Financial and Economic Affairs revealed that the country would unveil new strategies to “strengthen the regulation and adjustment of high income, protect legal income, reasonably adjust excessive income, and encourage high-income groups and enterprises to give back to society more.”

We can already see a number of entrepreneurs and businesspeople responding to this change in tone. Pony Ma, CEO of tech conglomerate Tencent, recently said that he was in the business of “deploying our technologies and expertise to help small and medium-sized businesses, public services and corporations collaborate internally and connect with their users externally”.

It is difficult to imagine the company saying that 10 years ago.

The next wave of ESG and responsible investment will come from China and the wider Asian region generally. The growth — and maturation — of wealth in Asia is one of the reasons for this shift.

But perhaps the more interesting one is the change in tone in Chinese politics, which is causing many entrepreneurs to reassess what they are doing to make a positive contribution to society more generally. Watch this space.

Transmission Private publishes a monthly newsletter that tracks the future of reputation management for private clients.

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Transmission Private publishes a monthly newsletter that tracks the future of reputation management for private clients.

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Transmission Private publishes a monthly newsletter that tracks the future of reputation management for private clients.