ESG is no passing fad, as more investors are convinced that alpha can be found in ESG and regulators continue to introduce rules to lift ESG standards.
Lehman, which paired up with Huaan Fund Management to develop ChinaÆs first qualified domestic institutional investor (QDII) mutual fund earlier this year, would not comment specifically on the detention of Han Fanghe, HuaanÆs general manager, in the aftermath of the much-publicised investigation of corruption in ShanghaiÆs social security system. According to Huaan, Han was arrested for "personal relationships". Lehman says, however, that the arrest does not present it with a reputational risk.
ôOur relationship with Huaan is in the form of a commercial relationship,ö a Hong Kong-based spokesperson at Lehman says. ôIt is not a joint venture and we are happy with the development of the QDII fund which took nearly $200 million in its offer period.ö
Penny Pan, senior consultant at Stirling Finance in Hong Kong, agrees with LehmanÆs assessment, but argues that events in Shanghai could make foreign companies gun-shy over relationships with companies in China: ôThe launch of the QDII fund has not been impacted but you could say in general that it is hard to do business.ö
The investigation into ShanghaiÆs social security system has already been commonly referred to as an attempt by ChinaÆs prime minister Hu Jintao to restrict the power of rivals linked to his predecessor, Jiang Zemin, whose power base is Shanghai.
In September, the Shanghai head of the Communist Party, Chen Liangyu, was fired and arrested for lending pension money to "illegal entrepreneurs", according to the government. Money was diverted to unauthorised investments in real estate and infrasturcture. Since then a number of political and business leaders have been arrested or investigated.
Sources in China are also calling the scandal a sign of terminal malaise in ChinaÆs pension system. They say the scandal's silver lining could be to hasten pension reforms.
On a visit to China earlier this year, the Hong Kong Retirement Schemes Association was advised by the country's Ministry of Labour and Social Security (MLLS) that the Shanghai pensions scandal was an isolated case. Following the visit, however, the MLLS announced that it planned to transfer control of Pillar 1 pension schemes, i.e. mandatory contribution schemes administered by city and regional authorities, into central government control and allow independent fund managers to manage investments separately.
The development of company-administered and fund manager-run enterprise annuity schemes, despite some uncertainty over the tax treatment of employer contributions across ChinaÆs disparate jurisdictions, is also encouraging more asset management companies to target a slice of the China pension scheme pie.
According to an executive at a leading asset manager with a presence in China, the development of several new tranches of pension provision, including enterprise annuities, is evidence of plans to reform the system.
ôThere will be a major upgrade in governance quality through the enterprise annuity system,ö he says. ôBoth governance and investment skill has already proved to be much higher at fund management companies than at securities companies which have suffered a crisis.ö
In its second annual sustainable investment report, the sovereign wealth fund says it invested $1.79bn in ESG bonds. Experts say asset owners next need to consolidate their standards.
Senior executives at the Taiwan financial group and Canadian pension fund believe that companies have to make an ESG transition, and may not have a choice in a few years.
Record low borrowing costs in Australia are feeding demand for the country's real estate, with domestic and global investors raising their allocations into the sector.
Experts have a diversified view on the appeal of private assets across the region, but one thing's for certain - inflows are rising, particularly into China and the US.