Shi Bo (China Southern Asset Management): Carbon-Neutral Investment for Sustained Development
The market is ever-changing, and investment strategies must keep up. With ESG investing becoming an industry consensus, investors worldwide are seeking efficient, transparent and quantifiable solutions. For this issue of the CIO Insights, we have invited Mr. Shi Bo, Vice President and Chief Investment Officer of China Southern Asset Management, to share his company’s practice and experience in carbon-neutral investment.
Shi Bo
Vice President and Chief Investment Officer (Equity), China Southern Asset Management
Mr. Shi Bo holds a master’s degree in Economics and is a CFA charter holder. Currently, Mr. Shi is the Vice President, Chief Investment Officer (Equity), fund manager, chairman of the Equity Investment Committee, and chairman of the Asset Allocation Committee at China Southern Asset Management. He has 24 years of experience in asset management. Mr. Shi Bo started his fund manager career in 2004 and has 18 years of experience in fund management/investment management.
In terms of investment style, Mr. Shi focuses on exploring long-term value in listed companies, values alignment of growth and valuation. He emphasizes the analysis of industry development trends and a company’s standing within
Q: What’s your view on the implication of ESG for investment in the context the “Carbon Peak and Carbon Neutral” goals?
A: In terms of A-Share investment, I am deeply impressed that ESG value has become a consensus for both domestic and international investors. On the operational level, traditional institutional investors need to incorporate ESG factors into their fundamental analysis. On one hand, companies with higher ESG levels have better governance and more stable medium- to long-term return; on the other hand, attention on ESG could help investors avoid various risks, especially policy risks and risks associated with financing costs. In addition, a value shift led by ESG will promote technology innovation, bringing a new range of development and opportunities.
Q: What innovations have China Southern Asset Management come up with in the field of ESG investment? How can long-term value and responsible investment be incorporated into the investment workflow?
A: China Southern Asset Management became a signatory to United Nations Principles for Responsible Investment (UNPRI) in 2018, and a supporter of the Task Force on Climate-Related Financial Disclosures (TCFD) in April 2021. We are one of the first companies to enter the ESG investing world. We’ve gradually established the ESG management framework and built up localized ESG investment research evaluation systems.
China Southern Asset Management’s comprehensive ESG rating system covers multiple dimensions, combines qualitative and quantitative approaches and focuses on major issues. We provide full coverage of market entities, with 4,000+ listed companies and 5,200+ underlying bonds in the rating universe so far. Most importantly, we’ve integrated internal rating within our trading risk management system, which enables risk interception and warning in day-to-day trading, so we can effectively identify and avoid “black swan” credit events in advance, and enhance portfolio risk management capacities and resilience. Meanwhile, our researchers closely follow the ESG-related performance of research targets, maintain good communication with respective companies and bond issuers, build standardized internal ESG questionnaires, and feed questionnaires and research reports into the database. After investment, we actively engage in drafting and implementing the ESG-related agenda of listed companies and investment targets, actively exercise shareholder rights or creditor rights, and optimize ESG disclosure and practice of underlying companies.
In addition to investment, we are directly acting on carbon reduction. China Southern Asset Management highly values sustainable development. With measures such as energy-saving regulation of intelligent office buildings, promoting paperless offices, and setting emission-reduction targets, we are contributing to achieving the “dual carbon” goals.
Q: Would you please share some of China Southern Asset Management’s experiences in carbon-neutral investment?”
A: China Southern Asset Management was the first public offering fund in China to launch carbon-neutrality action plans, and we have aggressively conducted research over carbon peak and carbon neutrality. First, it is paramount to build a carbon emissions database, which is the infrastructure the finance industry relies on to measure climate change risks that companies face, as well as an essential part of asset pricing and revaluation. However, carbon emission data of China’s listed companies is relatively scarce. China Southern Asset Management introduced third-party data sources, including Bloomberg’s carbon emission dataset, to measure through an AI algorithm the carbon emissions of underlying companies of corresponding portfolios. With carbon-neutral investment solutions, we are able to monitor and measure the carbon emissions of a portfolio, and then promptly adjust assets with high carbon emissions, reduce carbon emission curves, and achieve carbon neutrality for that portfolio. Second is to establish product systems closely linked to ESG and the “dual carbon” goals, and plan accordingly. In this aspect, China Southern Asset Management has featured themes and covers product systems across different asset classes.
Note: Cut-off date of investment target coverage was December 31, 2020.