Themed as“New Development with Sustainability", the 2021 International Forum for China Impact Investment (IFCII) was held in Shanghai on July 16. The 2021 IFCII was organized by the China Inclusive Finance Institute (CAFI) and co-organized by YICAI Research Institute and Shanghai Advanced Institute of Finance (SAIF) of Shanghai Jiao Tong University. Guangshao Tu, Co-chair of IFCII and Executive Director of SAIF Board delivered a speech "Improving three guidance mechanisms for socially responsible investment (SRI)".
The new development philosophy can serve as the guideline for China's high-quality economic development and the actions of SRI, because high-quality development would not be possible without the support of finance where SRI can play a big role. Guangshao Tu pointed out that SRI is a systematic project, and three guidance mechanisms need to be improved to better integrate SRI with high-quality development.
First, China needs to improve the government guidance mechanism for SRI at both macro and micro levels. Tu proposed that this mechanism can be implemented from three aspects: development planning, institutional arrangement, and infrastructure. "The development strategy can guide market entities to better fulfill their social responsibility in their business operations. At the same time, we need to establish a rule-based system, matrix systems, assessment and evaluation systems, with the core objective of forming incentive and restraint mechanisms. Such systems can drive market entities to perform social responsibility in their business operations. But they also need supporting infrastructure such as statistical system, accounting system, trading market and account system.” Tu said.
Second, China needs to improve the CSR guidance mechanism for SRI. Tu explained that business operations need capital. So how to channel more financial resources into enterprises with better CSR? Such a mechanism involves information disclosure, evaluation systems and data base. First, information disclosure helps the market and financial institutions to know the green development and social responsibility of market entities. In recent years, Chinese market entities, mainly listed companies, have made great progress in information disclosure. But there is still room for improvement. For example, to enhance the proportion and content, especially the quality of information disclosure. We need to improve standards and rules of information disclosure. Second, based on corporate disclosure, we also need to form a sound and complete evaluation system that is scientific, objective, and efficient, to better guide SRI of investment and asset management institutions. Third, both information disclosure and evaluation system should be supported by data, the importance of which is self-evident. Those three aspects can support the positive interaction between CSR practices and SRI of financial institutions.
Third, China needs to improve the guidance mechanism of investment and asset management institutions for all kinds of asset owners. In Tu's view, expanding SRI means that all kinds of asset management institutions and institutional investors should attract more private capital. This requires a guidance mechanism of the above-mentioned institutions, institutional investors, including individual asset owners and capital owners. Otherwise, SRI may be difficult to sustain.
"First, we can publicize and promote the investment philosophy, so that the market learns more about SRI and reaches a consensus. Second, we can provide more SRI products to meet the needs of different asset owners and individuals for capital allocation. Third, asset management institutions should enhance their investment capacity by grasping the new trend in asset structure and giving equal importance to financial and social benefits, to create credible and sustainable returns for investors.” Tu shared his view about how to attract more capital into investment institutions from the above three aspects.
Tu concluded that China’s SRI has developed rapidly in recent years through exchanges and cooperation with the rest of the world. With the advancement of high-quality development, SRI will show stronger momentum. While promoting China’s high-quality development, SRI will contribute to global ESG investment.