CLAMC's ESG initiatives building a greener future throughout China

China Life Asset Management Company, one of China's largest asset managers, has played a leading role in environmental, social and corporate governance — also known as ESG — investment in recent years.

The company, which is a subsidiary of the China Life Insurance Group, has relentlessly expanded the ESG investment landscape and proactively promoted innovation in products and services related to ESG.

The company signed up to the United Nations-supported Principles for Responsible Investment in November 2018, and became the first of its kind in China to sign up to the principles and implement the concept of ESG investment.

To date, over 80 Chinese institutions have signed up to the principles.

According to CLAMC, it will effectively bench mark ESG investment management capabilities with its global counterparts by drawing upon international best practices, and strengthen the influence of Chinese insurance asset managers in the global market.

The initiative can also contribute to the establishment of China's dual-circulation development pattern, the company said. This pattern aims to balance internal and external economic dynamics, and foster sustainable growth and resilience in the face of global challenges.

Leveraging its investment experience accumulated over the past five years, CLAMC has achieved many pioneering milestones and "firsts" in the ESG-related fields.

In 2021, for example, the company launched the industry's first ESG bond index — ChinaBond-CLAMC ESG Select Credit Bond Index — and the first ESG equity index — China Securities-CLAMC ESG Green and Low-carbon 100 Index — in a bid to help to promote the green transformation of social and economic development.

Moreover, it has introduced the first ESG insurance asset management product to be distributed through commercial banking channels, and set up the first green and low-carbon industry investment fund in the insurance asset management industry.

The backbone of these achievements lies in CLAMC's establishment of a comprehensive and systematic ESG investment evaluation system.

Other ESG-related initiatives the company has conducted include promoting and implementing China's "dual-carbon" strategy; adhering to industry regulatory guidelines; aligning with international ESG investment best practices; strengthening the company's strategic involvement in ESG and top-level design; and the ongoing systematic development and refinement of its ESG and green investment management framework.

In 2021, the company issued the industry's first firm-level ESG/green investment guideline — CLAMC's General Guidelines and Rules for ESG/Green Investment — to promote the integration of ESG into its investment management practices. In 2022, the company established an action plan and anchored around an initiative known as the "green engine".

The "green engine" was designed to make an initial step to incorporate the ESG concept into every facet of the company's investment management practices, which include strategy formulation, investment decision-making, post-investment management, risk management, operations and information disclosure.

This year, the company is also laying the foundation for its ESG integration policy framework. The framework aims to fully integrate ESG factors into the formulation of investment strategies, decision-making processes, the presentation of investment recommendations and the evaluation of alternative options.

These fundamental approaches will enhance the application of ESG principles, ultimately leading to comprehensive ESG integration throughout every stage of the investment process before, during and after the investment.

During the process, the company places a strong emphasis on localizing ESG integration in the Chinese market. "ESG investment, which originated in Europe and the United States, is a common language of global responsible investment," said a spokesperson for CLAMC.

"It is in line with internationally recognized standards and practices, and serves as a prerequisite for China's asset management companies to participate in international competition," the spokesperson noted.

At the same time, ESG investment in China should harmonize with the country's specific national context; take into account particular selection and evaluation metrics and criteria; and consider the existing domestic market condition and the prevailing information disclosure environment, the spokesperson added.

In addition to the localization, the company also continues to advance the application of ESG rating in the investment and risk control process.

As of now, the company has completed the ESG ratings for a total of 3,898 issuers, covering diverse investment categories such as fixed income, equity and alternative investments.

Among the diverse realm of ESG investment, green investment stands out as one of the pivotal components.

Green investment in essence is to support the allocation of funds to expedite the advancement of emerging industries and the transformation and upgrading of traditional sectors, the spokesperson said. It will be the most popular theme in the decades to come.

Aligning with major national strategic objectives, including the carbon goals, CLAMC has pursued new opportunities and undertaken a series of tangible actions in the field of green investment.

The carbon goals are among a few investment areas featuring certainty amid the challenges and uncertainties of the global economy, according to the company.

China has committed to achieving a carbon emission peak before 2030 and carbon neutrality before 2060.This plan specifically encourages the development of various eco-friendly financial instruments, such as green loans, green equity, green bonds, green insurance and green funds.

Additionally, mechanisms to expedite carbon emission reduction efforts are encouraged, alongside directives to encourage financial institutions to offer long-term, cost-effective funding for green and low-carbon projects.

"Compared with other asset managers, insurance and asset management companies are offered more diversified investing options, which can effectively optimize the investment structure of our mandates," said the spokesperson.

"The investment projects are closely linked to the operations and growth of real businesses. This connection serves to promote the practical application of ESG investments, and enhance their ability to support environmentally sustainable economic development with improved quality and efficiency," the spokesperson added.

For many years, CLAMC has primarily directed its green investment efforts toward new and clean energy initiatives. This approach is aimed at assisting its clients in embracing the concept that "clean and sustainable environments are as precious as gold and silver."

In July, the company joined the China Climate Engagement Initiative as a founding member. By June this year, the company has invested in more than 30 green projects, with a total investment of over 100 billion yuan ($13.7 billion). They cover a range of fields, including hydropower, wind energy, nuclear power, photovoltaics, waste-to-energy plants, rail transit, as well as traditional energy transformation and upgrading.

In 2019, the parent company of CLAMC, China Life Insurance Group, as one of the keystone investors, has led a 9 billion yuan investment in the mixed reform and introduction of strategic investors in the Qinghai Upper Yellow River Hydropower Development. CLAMC was authorized to represent the group's interest in the deal.

The Qinghai company is a subsidiary and core clean energy investment platform of the State Power Investment Corp. It is also a leading clean energy power generation enterprise in China, a key supplier of the northwest power grid, and a pivotal company involved in the west-to-east power transmission.

As the most prominent mixed-ownership reform project in 2019, it represents a significant initiative by CLAMC to promote the advancement of clean energy.

In order to make more substantial contributions toward China's carbon goals, CLAMC has continuously expanded its research and investment efforts in relevant fields.

In 2021, the company has led another strategic investment project on behalf of its parent company, which has invested 2 billion yuan to support China Huadian Renewables Group to accelerate the transformation towards renewable energy.

Moreover, CLAMC launched an equity investment plan for a 4.49 billion yuan investment in Dongfang Zhihui (Hebei) Renewables, a pivotal renewable investment platform of State Power Investment Corp in the Beijing-Tianjin-Hebei region.

It also set up a four-phase clean energy equity investment plan together with SPIC. To date, about 14 billion yuan has been invested, covering more than 100 clean energy projects, with a total installed capacity of 6 million kilowatts.

In 2022, CLAMC initiated another equity investment plan, becoming the second-largest shareholder and the largest strategic investor of Rich Energy Co, which stands as the central non-nuclear clean energy platform under China National Nuclear Corp.

This endeavor involved a significant investment of nearly 2.1 billion yuan. The fund primarily serves the purpose of advancing and constructing renewable projects, including photovoltaic and wind power, as well as the research and development of the renewable energy storage business.

By the midpoint of this year, CLAMC has invested a total of 370 billion yuan in green projects.