China ESG Funds Sidestep Stock Market Sell-Off on Fresh Inflows
(Bloomberg) -- ESG funds in China are outperforming the broader market amid an equity rout, as fresh inflows into sustainable assets across Asia boost returns, according to Bloomberg Intelligence.
Exchange-traded funds that invest in renewable energy, electric vehicles and other green assets have posted gains as high as 35% this year, even as China’s benchmark index declines amid government crackdowns on the technology, education and real estate sectors.
“Although the CSI 300 Index is having a tough year so far, with concerns over slowing of economic momentum and liquidity issues, China’s thematic ETFs outperformed the benchmark,” BI analyst Esther Tsang wrote in a note, citing China’s climate commitments and the launching of an emissions trading platform.
Even with a pull back this week, the Global X China Electric Vehicle and Battery ETF has gained 25% this year in Hong Kong, while the Global X China Clean Energy fund has jumped 20%. The benchmark CSI 300 index has dropped 8.7% before dividends.
China was among the Asian countries posting the biggest flow increases into environmental, social and governance funds, along with South Korea and Taiwan, Tsang said. ESG ETF assets in Asia jumped 20% to $48 billion, with flows of almost $6 billion in the first half that surpassed all of last year. Japan remains the largest market, accounting for 75% of assets in the region, down from 87% in 2020.
Across Asia, ESG funds are also outperforming the main benchmark as money continues to flow into environmental and sustainable themes.
“The net zero race is driving new climate regulations, which may open green opportunities and add risks to high CO2 intensity industries,” Tsang said.
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