China Investment Corporation (CIC), the country’s $1.2 trillion sovereign wealth fund, plans to focus on climate change as part of efforts to target thematic investment opportunities going forward, according to its sustainable investment policy released on November 13.
CIC said it wants to incorporate ESG factors into its entire investment process, from project screening to due diligence. It also highlighted that it would review and update its negative investing list more frequently, according to the statement.
“CIC’s commitment to sustainable investment will contribute to the long-term development of the global economy, as well as to the prevention and mitigation of systemic risks,” the sovereign wealth fund said in the documents.
“ESG developments in China are updating rapidly. More support from regulators is expected, and asset owners and asset managers are both working on better quality in ESG disclosure, data and implementation,” Fred Wen, China wealth leader and head of investments at Mercer China, told AsianInvestor.
Under the policy, the SWF aims to explore thematic investment opportunities. In the public market, the firm has launched a thematic equity mandate, and invested in ESG indices and active managers. In the private market, it aims to explore related opportunities with a focus on climate change.
The SWF will also incorporate ESG factors into its investment process, from project screening and due diligence, through evaluation and contracting, and on to post-investment portfolio management and deal exits.
The fund also plans to review and update its negative list periodically.
Climate action and affordable, clean energy are expected to have the biggest impact on how institutional investors invest over the next three years, according to a latest survey by SigTech.
The survey also said that 62% of pension funds and other institutional investors expect to increase their focus on ESG over the next three years. Some 14% said they expect their focus in this sector to increase "dramatically" between now and 2024, with just 7% claiming it would decrease, the survey revealed.
Daniel Leveau, head of investor solutions at SigTech, said that just a few years ago it would have been a very daunting task for institutional investors to develop and implement their own index strategies, but it is now achievable.
"Custom equity portfolios allow institutional investors to define the investable universe, tailor their investment strategy to incorporate specific ESG policies and to directly hold individual securities," he said.
SigTech commissioned the market research company Pureprofile to survey 100 pension funds and institutional investors across the UK, US, and Asia in September.