HSBC Asset Management has seen rising demand from Chinese and foreign asset owners for investments in China’s energy transition, and the firm is open to expanding local expertise in the country, especially for alternative investments, its chief executive officer told AsianInvestor.
This includes expanding capabilities in venture capital, private equity, and infrastructure investments in China in areas such as climate technology, green farms and renewable energy farms, said Nicolas Moreau, global CEO of HSBC Asset Management.
Moreau recently wrapped up a trip to several mainland cities, including Beijing, Shanghai, and Shenzhen, and met local regulators, governments, and clients, including asset owners.
“It’s incredible to see the level of interest from everyone,” the CEO told AsianInvestor.
In particular, a government agency in Shenzhen demonstrated strong interest in supporting HSBC Asset Management to establish an investment team in the southern Chinese city to finance its green transition, which includes venture capital and private equity investments in climate technology.
“The ecosystem of startups in Shenzhen is huge. So, they want to have the finance to create a full ecosystem,” Moreau said.
“You can see that both from an asset owner and regulator and government standpoint, there is a real will to support initiatives in this field.”
Although HSBC Asset Management doesn’t have any plans yet regarding an investment team in Shenzhen, Moreau said they are considering the possibility given the incentives offered and the opportunity to help build a whole investment chain from venture, growth, private equity, to infrastructure.
DEMAND ON TRANSITION
Broadly speaking, Moreau said clients’ interest in China’s green assets comes from Chinese asset owners such as insurance companies and governmental bodies, and international companies with operations in China.
They are often corporations with infrastructure in the country and want to achieve carbon neutrality in their buildings as well as their business operations.
“There's a lot of demand from international investors who have big setups in China and want to generate carbon credits to reach their net-zero objectives,” he said.
Hence, the most popular assets are green infrastructure with a carbon offset structure, such as green farms and solar farms.
Meanwhile, over the long term, the firm is also eyeing developing its venture capital capabilities in China via its climate tech venture fund.
Outside of China, Moreau said he has also received “huge demand” from asset owners for green assets in China, including asset owners in Japan.
As of the end of March, HSBC Asset Management managed $641 billion in assets.
Earlier this year, it added energy transition infrastructure capability by onboarding specialist asset manager the Green Transition Partners (GTP) into its alternative investment team in Asia.
The GTP team invests in and works alongside local developers across Asia, targeting mid-market investments in renewable energy generation, storage, grids, charging, and hydrogen infrastructure.
Currently, HSBC Asset Management is setting up a fund to invest in pan-Asia greenfields, wind farms, and other infrastructure.
“On the alternatives side, our main objective is to finance the transition, either through product investing in green bonds, financing the construction of green infrastructure, or investing into nature-based restoration assets,” Moreau said.
“There is an idea also to expand this team in mainland China where there are a lot of incentives to develop green farms, solar farms, and wind farms,” Moreau said.
Noting that every country has its specificities and complexities in the decarbonisation process, Moreau said China is still relatively new in private market investments in the area.
But he’s confident in HSBC’s capabilities in China.
“As a bank, HSBC, we are very Chinese — it is the Hongkong and Shanghai Banking Corporation. So, we've got a lot of local knowledge, support, and capabilities that we can build on… We have the teams and support locally to understand this [market],” he said.
He noted that all mainland China-based employees at HSBC Asset Management are Chinese or can speak Mandarin.
“I don’t think otherwise we can be successful,” he said, adding that for any potential team members in mainland China, local expertise is a must.
On team building, the CEO stressed that investment expertise remains the most important factor when the firm hires for energy transition-related investment teams, since the soundness of clients’ assets is a priority.
Given HSBC’s size, Moreau said he doesn’t see difficulties in hiring capable talent in the local market, and at the same time, the firm wants to develop its own ESG talent pool within the company. This includes hiring in the Hong Kong headquarters and sending outstanding members to be based in mainland China.