Sustainability will be one of the most exciting investment themes in China’s stock market in the years to come as green efforts across the globe are spurring the growth of Chinese new energy companies, top global asset managers said. BlackRock, the world’s biggest asset manager, has moved to an overweight position on new energy over the past six months and is prudently adjusting its portfolio with investments in solar inverters, electric vehicle batteries and photovoltaic-related components. “This is not solely based on the global sustainability drive and climate change, but also on the increasing role we see China stepping into as a reliable global supplier of sustainability solutions. We have spotted companies with defendable global positions in these areas,” the company said in its mid-year Asia investment outlook. Lucy Liu, Portfolio Manager at BlackRock, said that China accounts for 80% to 90% of market share across many sub-sectors of the solar value chain, helping Chinese companies benefit from increasing overseas demand.
Domestically, China’s target of achieving carbon neutrality by 2060 also serves as a strong driver for the solar and electronic vehicle sectors, she said, as electronic car penetration has doubled from 6% last year to 12% by May. “We actually see very big structural opportunities on sustainability in China,” said Liu. Sustainability-themed investments have emerged as popular options for investors in China as 45 out of the 115 publicly offered funds focussed on environment, social and governance (ESG) have yielded more than 50% returns over the past 12 months, according to the China Securities Journal. Fidelity International said that the assets under management of ESG funds amounted to USD17 billion in the Chinese mainland market by the end of last year, almost triple the USD5.8 billion a year earlier. Chinese retail investors may be leading the way in Asia in terms of awareness of ESG investing, according to Fidelity International. In May, China published draft rules that require listed firms to disclose a separate chapter on environmental and social responsibility in annual and semi-annual reports, the China Daily reports.