Interview With Moodie Investors Service Inc Managing Director And China General Manager Shi Hao: Promote Transparent ESG Evaluation Standard And Increase Strategic Investment In China Market.

The opening up of the capital market has been gradually promoted, and countless foreign institutions are emerging.

For Moodie, an international rating agency, the continuous opening of China's financial market is more attractive and brings new opportunities. Not long ago, Moody's announced the acquisition of a minority stake in Daorong green, a leading domestic ESG data and analysis institution, to enter the domestic ESG market. With the ESG concept gradually being valued by the domestic market, a large number of institutions are also attracted by its broad development prospects.

Recently, the 21st century economic news reporter interviewed Shi Hao, the managing director of Moody's Investor Service Company and the general manager of China, to exchange and discuss Moody's market positioning in China and the company's strategic arrangements in the future.

Focus on China's ESG Market

Twenty-first Century: why should Moodie consider entering the Chinese ESG market? What is Moodie's ESG strategy?

Shi Hao: first of all, China's ESG market has a good growth, and various market data also guide us to focus on the Chinese market. Secondly, ESG is Moody's global key business, and its investment in commercial road financing green is also in line with Moody's global development strategy. In addition, one of our important strategic objectives is to vigorously promote transparent ESG evaluation standards and promote the healthy development of China's ESG market.

Twenty-first Century: what does Moodie think of the current ESG market in China? What are the opportunities and challenges?

Shi Hao: from the point of view of society, after decades of rapid development, China's economic structure is changing from the extensive growth mode to the high quality development stage. China's basic environment is gradually becoming mature. From a market perspective, more and more investment institutions in China have incorporated ESG factors into investment. Some organizations have launched the products of ESG concept; in addition, the Chinese government has paid more and more attention to ESG and green finance. In 2016, green finance was formally written into the 13th Five-Year national economic and social development plan, and relevant regulatory authorities are actively formulating policies and regulations for mandatory disclosure of ESG information of listed companies and issuers. China is in a good period of development.

When it comes to opportunities and challenges, first of all, ESG originated in overseas mature markets and has been introduced to China for a relatively short time. In 2016, policies were just introduced, so the acceptance and awareness of investment institutions and enterprises to ESG will be weaker than that of mature markets. As we know, the proportion of domestic enterprises in formulating ESG strategy is lower than that in the international market; secondly, from the introduction of the concept of ESG to the generation of effective returns and premiums, to the formation of an independent asset class, it remains to be tested by the market and time; finally, market communication and education need to be strengthened. However, it also brings opportunities for Moody's to provide high-quality products and services to the market.

Strategic arrangement in China

Twenty-first Century: why do we choose this opportunity to invest in a minority stake in green? How do we cooperate with the business road's green plan?

Shi Hao: first of all, in terms of numbers, the green bond market has developed rapidly in recent years, which is a very important opportunity. Second, Moody's is increasing its strategic investment in China. In addition, in the ESG business line, Moody's also acquired two other outstanding companies in the ESG field in France and the United States this year. At the same time, we also focus on domestic ESG enterprises in China. Shangdao ronglv has strong advantages in China's ESG data and solutions, which will complement Moody's growing ESG data and solutions platform and consolidate our advantages.

We integrate these three distinctive companies to form an integrated and perfect ESG service platform to provide better services to investors and issuers around the world. We can rely on our own advantages and capabilities to provide investors and issuers with a wide range of products and services for ESG needs, including joint research, product development and technical cooperation.

Twenty-first Century: how to evaluate a series of initiatives of China's capital market opening to the outside world? What are the expectations for further opening up of China's capital market?

Shi Hao: China has adopted a selective, step-by-step approach to opening up the financial market. This open model is suitable for China's national conditions and domestic policy objectives, that is, to maintain growth on a stable basis. Furthermore, China's open financial market is consistent with its own development needs. Only by further opening up the financial market can we improve the efficiency of capital allocation, promote economic growth and facilitate the balance of current account.

International experience shows that open financial markets can improve economic efficiency. Although the open financial market may bring greater systemic financial risks to the low-income economies. However, we observe that the Chinese government has the ability to control such potential risks through a variety of tools. In addition, opening the capital market and attracting foreign investment are also conducive to offset the pressure on China's balance of payments brought by the reduction of current account surplus in recent years.

Therefore, our observation of China's financial market opening strategy is to promote a higher level of opening up on the basis of risk prevention and control. For the financial sector with limited strategic importance and certain risk management capabilities of domestic enterprises and regulators, the government has been actively promoting its opening up However, for the sectors with great strategic significance and the regulatory system still needs to be improved, the government may consider risk prevention and control more, so the open attitude will be more cautious, which is understandable.

As for the expectation, the open door will not be closed easily. In recent years, China has opened up the bond market between the investment banks of overseas financial institutions. In addition, various opening measures such as "Shanghai Hong Kong stock connect", "Shenzhen Hong Kong stock connect" and "bond stock connect", as well as the listing of crude oil futures, have shown that the breadth and depth of financial market opening up have made great progress. We see that the government's attitude is to continue to open up, and we still have a positive and optimistic attitude towards the future.

The opportunity of opening up brings more foreign investment. According to the latest data of the central bank, as of the end of the third quarter, the scale of foreign holdings of Chinese stocks and bonds reached 1.8 trillion yuan and 2.2 trillion yuan respectively, both of which reached new highs. Foreign investment in China's financial market has maintained a good momentum. In this context, the integration of standards, systems and information exchange are good opportunities for professional companies like Moody's, and our services will also meet more needs. In recent years, Moody's development has been realized in line with the development and process of China's financial market. Therefore, Moody's participation and investment in China's market will not be interrupted, but will continue to strengthen. In the future, we will also maintain such a situation.