China, Climate Change & Investing

 New Climate Change Index for Chinese Investors

Source:  Chinese Stock Exchange

Promoting the Environment, Social and Governance Standards

MSCI, the New York City based financial services company, has launched Climate Change indexes for China stocks.  The indexes allow investors in China to put their money into companies with lower carbon emissions. The indexes allocate more weighting to less polluting companies, such as the internet giant Tencent and LONGi Green Energy Technology.  MSCI has launched similar Climate Change indexes in the EU, US and Japan.  MSCI is a global provider of equity, fixed income, hedge fund stock market indexes and analysis tools.

Megatrend: Investors Focusing on Climate Change

MSCI expects global investors to increasingly focus on Climate Change and put their money into companies with strong pro-environment policies and results.  MSCI is in discussions with a number of institutions about creating investment products based on Climate Change indexes.  In China, the Climate Change indexes launch comes at a time when the Chinese government is trying to open up its capital markets.  China is involved in a very difficult balancing act between cutting pollution and moving its economy forward.  Like the rest of the world, the Chinese economy has been hard hit by COVID-19.

ESG Standards

MSCI says it's trying to promote environmental, social and governance (ESG) standards in China.  The new Climate Change indexes for China are based on the MSCI China Index and MSCI China A Index, which have been operational for several years here in the US.  The company says the market will discount share prices of companies with poor ESG compliance.  Currently, ESG-focused foreign investors are putting pressure on listed companies in China, where ESG compliance has been seen as inconsistent and sub-standard.

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