Responsible Investing in China

by John Streur, President and CEO; Hellen Mbugua, Vice President and ESG senior research analyst; and Jade Huang, Vice President and Portfolio Manager; all at Calvert Research and Management. 

It is undeniable that China’s influence on the global economy, global financial markets and geopolitical system is significant. From an economic standpoint it is the second-largest economy in terms of GDP and is slated to reach parity with the US in the next 10 years or so. In global financial markets, China represents 43% of the MSCI Emerging Markets Index and 5% of the MSCI All Country World Index as of August 31, which follows the United States and Japan. Moreover, 22% percent of the MSCI All Country World Index is non-Chinese companies dependent on the purchasing power of Chinese consumers to fuel their own companies’ sales and profit growth. On the geopolitical front, China continues to be an export machine supported by the country’s low-cost, skilled labor and efficient infrastructure.

However, the decision whether to invest in China is a complicated one, particularly to a responsible investor. The power and reach of China’s state-led model, its weak human rights record, lack of transparency, as well as heightened geopolitical tensions, can dissuade international investors from investing in Chinese companies or non-Chinese companies doing substantial business in China. Calvert’s viewpoint, however, is that it is preferable for a responsible investor to invest in China and engage as a shareowner, rather than divest. At Calvert, we believe as responsible investors we should fully understand the unique risks that investing in China may offer and weigh that against the return potential that a country with diverse people and a rich culture can offer in the form of both investment opportunities, in areas such as renewables, infrastructure, technology and consumer goods, as well as shareholder engagement. Engagement can create opportunity to be a part of positive change that advocates for business practices that can benefit the planet and the quality of life for billions of people. 

Read the complete article, which is the first time GreenMoney has covered China, here - https://greenmoney.com/responsible-investing-in-china 

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