Chinese life insurers have entered the country's green investment industry and should accelerate its expansion from an already impressive growth rate of nearly 20% in 2020, according to a latest industry report on insurers’ green investment trend published by Insurance Association of China on June 16.

The report noted that the entire industry ended up achieving a size of Rmb561.5 billion ($87.2 billion) at the end of the year. It outlined several aspects for insurers’ next move on green investing, such as adding more innovated and diversified investment methods by setting up new green development funds and digging more onto climate bonds and blue bonds products.

Experts believe that life insurers' increasing exposure in green investment and higher disclosures of ESG principles is a boost to the overall industry of green engagement. However, the process is still in early stages and the amount is not large compared with their overall assets. 

Even the term “green investment” can mean different things to different people – so it will be key for industry guidance and standardisation on the criteria and definition, in addition to guidance around disclosure, said an expert from JP Morgan Asset Management. 

A DROP IN THE OCEAN

Ping An aims to conduct $62 billion
of green investment by 2025.

Ping An Insurance (Group) (Ping An), country’s leading insurer, has also mapped out its green investment route with a target annual growth at 20%, in line with the industry trend and national force. China’s first-ever $13.8 billion National Green Development Fund is preparing for investment team expansion.  

According to its April announcement, the group set targets for the annual growth rates for its green investments of no less than 20% and green credit balance no less than 20%. By 2025, it aims to achieve the overall targets with investment and credit of Rmb400 billion.

Ping An said it intends to work on increasing investment in green assets. These include, but are not limited to, listed company stocks, bonds, public funds, private equity, debt plans, special asset management and trust plans. It will also encourage development and innovation in green financial products, according to the announcement.

The insurer's green investments reached Rmb103.3 billion, and its social and inclusive investments stood at Rmb930.5 billion in 2020, according to its’ latest ESG report published in February.

Ping An of China Asset Management (Hong Kong), an offshore investment unit of the insurer, has also launched a China-focused green bond fund in November 2019. As of September last year, over Rmb580 million had been deployed. The fund has fully deployed its assets into 46 eligible green bonds, with underlying projects benefiting over 26 countries, according to a spokeswoman from Ping An.

State-controlled China Life Insurance, the second largest player, also noted in its 2020 annual report that it had set up the ESG Committee in 2020, allowing it to make new green investments of Rmb30.6 billion. Wang Junhui, chief investment officer of China Life Insurance, told mainland media in mid-May at a conference that green investment is the only topic that has “full awareness” from all market players.

Wang urged regulators to offer more support on green investment and innovation on green investable products. He added the group is aiming for a green penetration in all kinds of products.

China Pacific Insurance also noted in its 2020 annual report that it had invested nearly Rmb40 billion in new energy area, as of end-2020. A spokesperson told AsianInvestor that the group has been actively building its green investment plan and will announce details in due course.

INCREASING INTEREST

The insurers' total amounts of green investments are tiny compared with their overall investment pool, but an industry expert who asked not to be named told AsianInvestor that this could change. 

Tomomi Shimada,
JP Morgan AM

"We have observed increasing amount of interest from Chinese insurers to invest into clean technology, as well as green energy," added Tomomi Shimada, sustainable investing strategist for Asia Pacific at JP Morgan Asset Management.

"We believe green investment in China is still at early stage, although the total scale of green investment today is already fairly substantial given the size of its economy," she told AsianInvestor.

Ping An’s investment portfolio of insurance funds grew 16.6% from the beginning of 2020 to Rmb3.74 trillion as of December 31, 2020. But its green investment target has surpassed its rival. According to French insurer AXA’s latest annual report, the group set a target of €24 billion ($28.62 billion) green investments by 2023.

“Chinese insurers, or say Chinese firms, did not start ESG/green investment as early as foreign peers. It is not surprising that we would see a gap in the short term in terms of green investment deployment and gap in ESG engagement,” the expert added, “But China’s market size and diversified investment environment could close the gap.”

The investment hole could also be filled by the country's growing green bonds market. Chinese insurance companies, just like insurance companies in other countries, are interested in investment that generates stable return. Green bonds are therefore an area of focus, as is project financing for renewable energy, Shimada added.