ESG managers "weigh" future of China holdings, EU warns Xi against undermining Russia sanctions & Questions emerge over report alleging PLA hacked strategic Ukraine targets -- China Boss News 4.4.22
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ESG managers "weigh" future of billions in China holdings
Russia’s war on Ukraine is causing ESG managers “to look at China with a fresh sense of unease,” Bloomberg has reported. Some are saying that they are seriously “weigh[ing]” the future of their China holdings and trying to determine how to fulfill legal and fiduciary obligations while Beijing gives tacit support to Putin.
Bloomberg [excerpt]:
“The Chinese government isn’t beholden to anybody except for itself,” said Sonia Kowal, president of Zevin Asset Management. Russia’s invasion of Ukraine and the international condemnation through sanctions may be a dress rehearsal for China, she said in an interview.
“What we’re worried about is the risks become even higher going forward,” Kowal said. Boston-based Zevin, which managed $720 million as of the end of February, hasn’t yet decided whether it’s going to reduce its investments in China, she said.
European funds are in a particularly tight situation as they are subject to new controls on how ESG risks are revealed under the EU Sustainable Finance Disclosures Regulation (SFDR) that went into effect in 2021. The SFDR was intended to stop the practice of financial firms misrepresenting products as sustainable by categorizing funds sold in Europe into three groups - Article 6, 8, or 9 - with varying degrees of financial disclosures.
According to Bloomberg Global Data, at least $7 billion in European managed Chinese assets are “categorized as Article 9, which is the highest sustainability classification,” while $124 billion and $162 billion are in the “laxer” Article 8 and Article 6 SDFR classifications, respectively.
Putin’s military aggression against Ukraine “hasn’t only renewed scrutiny of the parallels between Russia and China, it has put the countries’ relationship in the spotlight,” especially since on the eve of Russia’s invasion, “Chinese President Xi Jinping hosted Putin at the Beijing Olympics, a public demonstration of warm relations.”
Bloomberg:
The situation with China is “complicated,” said Joe Dabrowski, deputy director of policy at Pensions and Lifetime Savings Association in the U.K., in an interview. The country is such a global power that any decision to blacklist it would have “such big knock-on consequences,” he said.
But Paul Clements-Hunt, who helped coin the ESG acronym in 2004, finds the idea “[t]hat this is even a debate for ESG managers” who oversee trillions of funds, much of which has been invested into the dictatorships of Russia and China, “a sign that the movement has lost sight of its purpose.”
Bloomberg:
The “G” in ESG, which stands for governance, means investors should take the political regime of the country whose assets they own into account, Clements-Hunt said in a recent interview. “If you don’t factor in autocracy and a malevolent government, then you have failed in your ESG assessment,” he said.
For the rest of Bloomberg’s report, China Stirs Unease for ESG Managers Blindsided by Russia’s War, click here.
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