Chen Daofu: The Real ESG Is Not A Constraint Of Equity Investment, But A Tool To Discover Value

Editor's note

After 30 years of rapid development, China's private equity investment industry is also facing a new proposition: how to transition from "high-speed development" to "high-quality development"“ The 14th five year plan puts forward the goal of "carbon peak in 2030 and carbon neutralization in 2060", which points out a new direction for the industry. On the afternoon of April 18, a closed door Seminar on "practicing carbon neutrality: opportunities and challenges of equity investment" sponsored by 21st century economic report, Beijing Green Finance Association and 21st century innovation capital research institute was held in Beijing. It includes the participation of national social security, Guoshou investment, Shengshi investment, CPE Yuanfeng, TPG, CITIC Capital, Ernst & young, Hony investment, green capital, Qingyu fund and other mainstream institutions to discuss the opportunities and challenges of equity investment under the theme of "carbon neutral".

At the meeting, Chen Daofu, deputy director and researcher of the Financial Research Institute of the development research center of the State Council, shared his three experiences on ESG.

Investment concept turns to balance of multiple interests

He believes that, first of all, the change of investment philosophy has actually become a very obvious trend at present. The core of investment is to obtain return on investment. However, in recent years, people pay more attention to the non-financial indicators of investment while paying attention to the return on investment.

"There are several things that have led to some changes in the target ranking of return on investment. First, the epidemic started last year, which is a very big external impact on the change of investment concept. The epidemic makes us suddenly realize that the relationship between human and nature will have a profound impact on human life. Although before the epidemic, a variety of investment ideas with social responsibility were very common, including social responsibility investment, green investment and so on, the scale and recognition of ESG investment in the past two years have been rising rapidly, and the international market is increasingly inclined to invest in the investment selected by ESG. "

Chen Daofu said that from the perspective of ESG investment, the more companies attach importance to environment, social responsibility and corporate governance, the more able it is to provide good shareholder services and a company with long-term value. These companies may have some deviation in short-term financial returns, but due to the particularity of China's stock market in the past two years, stock investment in leading enterprises and blue chip stocks has performed better, so the short-term return and long-term return are highly consistent.

In addition, he believes that high-quality growth means that we no longer only focus on the growth rate and the efficiency of economic dimensions, but also begin to solve the problems of imbalance and insufficiency. This means that as an investor in the framework of high-quality growth, it can not only focus on economic returns, but also pay more attention to the harmony between nature and the surrounding stakeholders, and pay attention to the issue of effective governance. Under such a background, only those enterprises that can perform well in all aspects of ESG will be able to achieve more consistent development in high-quality growth in the future.

Chen Daofu believes that "carbon peak" and "carbon neutral" actually strengthen the requirements for the environment, and now they have risen to a stage where all departments begin to deploy and implement. For enterprises, this is not a matter of calculating economic accounts, but the behavior of forcing them according to the timetable; For investment activities, this will inevitably be reflected in financial investment returns. The change of investment philosophy has begun to shift to the balance of multiple interests, not only shareholders' interests and financial returns, but also the cross integration of Chinese enterprises' own investment ideas and overseas large fund entities' investment ideas.

He stressed that investment needs to focus on ESG. Although at the beginning, the assessment of financial indicators is a hard standard, but in the assessment of financial indicators, we should also take the perspective of ESG and the filter screen of ESG.

Three paths to optimize configuration

Combined with the "carbon peak", "carbon neutral" or the recent development of green finance, institutions should first identify what is carbon emissions and how much is it? How to measure? Chen Daofu said that after the identification and measurement are completed, from an economic point of view, it will involve how to optimize the process. Different subjects produce the same emissions, and the final economic or social benefits are not the same. Secondly, in the case of clear objectives and measurement, it is necessary to optimize the allocation, which is a good thing in the financial field. In the process of financial system playing a role, many green financial paths have been developed, such as green bonds, green loans and so on. In the future, the financial system may follow three paths.

The first path is positive motivation. By means of green credit, green bonds or a special channel, the system can provide some convenience or benefits to enterprises that do well in environmental protection and carbon emission optimization, and encourage enterprises to achieve "carbon peak" and "carbon neutral" better.

The second path is negative incentive. According to the concept of balance sheet, it is the behavior of liabilities, that is, the process of optimizing the allocation as much as possible through the way similar to the allocation of resources. Chen Daofu believes that the financial system can also more actively guide investment culture and investment philosophy in the asset plan to form a virtuous circle and finally achieve performance.

Finally, from the perspective of equity investment, it may be a better way to realize the idea of "carbon neutral" and ESG investment concept. He hopes that the fund holders can use the concept of social responsibility and ESG to guide corporate behavior, and then the enterprise will influence the final performance. He said that the path of this process is relatively long. Although it is difficult to promote this issue in the stock market, it may be a good start in the incremental market.

Chen Daofu said that we should pay attention to "carbon neutrality", ESG environment and social responsibility and corporate governance from the beginning of equity investment, and investment institutions should carry this concept in shaping, selecting and value mining, so as to better promote the development of ESG. Investors are looking for the future value. The future value must not be limited to financial returns, but to achieve a harmonious investment with the society. In this process, only the investment embedded in nature and society can become a great investment and create a highly successful equity investment.

He believes that only by jumping out of the existing financial framework, from a larger and more diversified vision, and more internalized understanding of the relationship between the various elements, can we find the value emerging from the whole system, not just one-sided value. A real ESG is no longer a constraint on equity investment, but a tool for institutions to discover value.

?