Ping An CIO sees 'exponential' effects from China's net-zero investments

The insurance giant's investment chief believes a $19 trillion funding gap in China’s energy transition could be covered by policy support, technology, innovation and reduced coal consumption.
Ping An CIO sees 'exponential' effects from China's net-zero investments

Ping An Group’s chief investment officer said he’s not worried about China’s carbon neutrality target by 2060 target despite the funding gap facing the country’s energy transition.

“It is not just about the money spent in budget, but also the technological advancements, progress in terms of cutting down coal consumption per unit of electricity generated. So there are so many moving parts in the whole system,” Ping An Group’s CIO Benjamin Deng said.

Benjamin Deng,
Ping An Group

China is committed to achieving net zero, or what the country calls carbon neutrality, by the year 2060.

It also has a target of peak carbon emissions by 2030 – the only country in the world that has made such a commitment.  

This has been followed up by policies such as encouraging energy transition-related industries and investment, restricting carbon emissions of factories and coal manufacturers, the development of carbon trading, and guidelines for banks and insurance companies on responsible investment and corporate governance.

According to China’s Ministry of Ecology and Environment, the country requires more than Rmb139 trillion ($19.4 trillion) of investment, equating to a long-term funding gap of Rmb1.6 trillion annually, to reach its dual-carbon targets in 2030 and 2060.

“It was a linear regression or linear projection about how much money you need to put in every year," Deng said. “I think people must consider the exponential knock-on effects of the spending, which will roll up exponentially. And there are also implicit policies.” 

“I'm not worried about 2060. I think the country is going to be there by then,” he said during AsianInvestor’s recent 18th Asian Investment Summit.

As a life insurance company with more than $600 billion in assets, Ping An sets annual growth rates for its green investments of no less than 20%. It aims to achieve the overall targets by 2025, with green investments and green credit reaching Rmb400 billion ($55.8 billion).

By the end of 2022, Ping An’s green investment and financing totalled Rmb282.3 billion. The scale of responsible investment of its insurance funds was Rmb804.7 billion, accounting for 18% of the total Rmb4.37 trillion insurance assets, according to Ping An's 2022 sustainability report released in March 2023.

Source: Ping An 2022 Annual Sustainability Report

“On public equity and bonds, I'm not worried about ESG or green investments because we're driven by policy, and the policy is already hard enough to chase,” Deng said, referring to the fact that the central government requires large asset owners such as life insurance companies to be pioneers in funding the country’s energy transition.

ALSO READ: Ping An contributes to China's first ESG disclosure standards

For example, insurance companies are provided with a 10% discount for the credit risk charge in green bonds under its new risk-based capital regime, the China Risk-Oriented Solvency System (C-ROSS) Phase 2.

Ping An, meanwhile, has integrated its proprietary artificial intelligence-driven scoring and rating system into the investment process.

Recently, the company refined the system to make sure it is in line with the country’s latest policy directions, including the new green financing guidelines issued in June 2022.

This includes reviewing the ESG scores on each private equity project it invests in, Deng said.

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