Recently, Jizhe Ning, Vice-chairman of the China Center for International Economic Exchanges and Duoguang Bei, Secretary General of International Forum for China Impact Investing (IFCII) were invited to lead a delegation to Spain and France to attend the 2023 Global Impact Summit (hereinafter referred to as the "Summit") organized by the Global Steering Group for Impact Investment (GSG). Heads of Zhejiang Rural Commercial United Bank, Shanghai Rural Commercial Bank and other financial investment institutions also joined the delegation.
1. Overview
The Summit focused on three major themes: mobilising capital for people and planet, where it is needed most; achieving full transparency in measuring impacts; accelerating impact and social economies. Key topics discussed included climate disclosure, inclusive finance, impact measurement and management, public policy, technology for good, education and culture, and many other fields. During the visit, the delegation had productive meetings with Sir Ronald Cohen, Co-founder Chair and President of the GSG, Nick Hurd, Chair of the GSG, and a former British MP, and Tristan Ace, Chief Product Officer at AVPN. Additionally, the delegation engaged in in-depth discussions with GSG expert committees from South Korea, Japan, and Indonesia on impact investing in Asia and proposed to establish a regular communication and joint work mechanism. The delegation also visited the Malaga Social Innovation Center, where they had the opportunity to learn about the products and services of local businesses engaging in eco-agriculture, food safety, environmentally-friendly materials, energy-efficient buildings, cleaner production, orphan care, and elderly care, and more.
In France, the delegation engaged in fruitful discussions with their counterparts on topics such as financial education, inclusive finance, and sustainable finance. They visited the headquarters of the OECD and AXA Group, where they met with Miles Larbey, Head of the Financial Consumer Protection Unit at the OECD, Tamas Hajba, OECD Representative in China, George Stansfield, Deputy CEO of AXA Group, and Garance Wattez-Richard, Head of AXA Emerging Customers. Additionally, the delegation had the opportunity to meet with the Chinese ambassador to France to gain insights into bilateral trade and the macroeconomy of France.
2. Some Thoughts
2.1 Impact investing is gaining global momentum. Impact investing refers to the practice of considering both financial returns and the measurable positive social and environmental impacts of an investment. Impact investing is intertwined and overlapping with socially responsible investing (SRI), sustainable investing and ESG investing across a wide range of areas. It has become a significant topic of interest for the international financial and investment community, representing a major trend in global investment. The GSG was established in August 2015 as the successor to the Social Impact Investment Taskforce established under the UK's presidency of the G8 in 2013. Currently, 41 countries have joined the GSG. This year's Summit was attended by more than 1,000 experts, officials, parliamentarians and delegates from 65 countries, including six new member countries (i.e., Sri Lanka, Peru, Norway, Greece, Belgium and Malaysia). The impact of impact investing is expanding from developed to developing countries, spanning across Europe, North America, Asia, Africa, and Latin America.
2.2 Innovation is the main force driving impact investing. On the concept level, impact investing inherently embodies principles of fairness and environmental protection, integrating the concept of sustainable development into the investment value chain. On the practice level, there is a significant demand for green, social, and sustainable development investments across all countries. However, the global financial gap in achieving the sustainable development goals (SDGs) remains substantial, reaching up to $4 trillion annually, while bonds issued by developing countries represent only 15% of the global market share.
Consequently, countries, institutions and enterprises are taking action. China has proposed the 30/60 targets and raised significant funds. Spain, Portugal and other European Union countries are promoting social and economic development by improving policy and legal frameworks, lowering financing thresholds, and creating centers for social innovation capacity. OECD and other international organizations have taken the initiative to contribute to zero carbon emission. AXA Group has set the goal of reducing carbon emissions by 20% in 2025 and plans to realize net zero carbon emissions by 2050. They have integrated seven sustainable investment principles into their asset management and investment practices, including the exclusion of fossil energy investments from their strategies. As of 2023, the company manages nearly 26 billion euros in green assets.
2.3 Standards are an important basis for the evaluation of impact investing. Impact measurement and management are designed to establish global baseline standards for corporate sustainability disclosure by integrating existing standards, such as International Financial Reporting Standards (IFRS) with the European Financial Reporting Advisory Group's (EFRAG) program, the Corporate Sustainability Reporting Directive (CSRD), and the U.S. Securities and Exchange Commission's Proposal (SEC Proposal). The formal establishment of the International Sustainability Standards Board (ISSB) in 2021 marked a new era of transparency in global impact investing management. In June 2023, the ISSB published the inaugural global sustainability disclosure standards. Additionally, the International Foundation for Valuing Impacts (IFVI) is currently developing a globally applicable methodology for valuing corporate social and environmental performance through monetary assessment. This complements the ISSB and provides a more standardized and intuitive tool for measuring and managing impact investing. This aligns with the idea of building a Corporate Social Responsibility (CSR) evaluation system in China and serves as a reference for impact investing measurement systems in China.
2.4 Education serves as a foundation for expanding impact investing. During the delegation's visit, it became evident that financial consumer and investor education is a shared consensus among major developed economies worldwide, as well as in China. The OECD and the G20 have jointly released High-Level Principles on Financial Consumer Protection, which emcompass 12 principles. However, there are still several issues that require further study and exploration, such as bridging the digital divide and preventing greenwashing resulting from financial innovation. To promote financial health, the OECD emphasizes the importance of capacity building from the demand side and improving financial services for disadvantaged groups and small and micro-enterprises. Financial regulators and think tanks in China have also conducted research on this issue. On this basis, we can strengthen exchanges and cooperation with the OECD to deepen the theoretical research on financial health and strengthen practical implementation.
2.5 Inclusion serves as a crucial guiding principle for impact investing. Inclusive finance is a significant area of international impact investing. It considers both efficiency and equity, empowering vulnerable groups to fully reap the social benefits of impact investing. Some multinational financial companies have gained valuable experience in serving disadvantaged groups and small and micro-enterprises globally, designing financial products that better meet customer needs. Improving the viability of financial products becomes particularly important in this regard. During the delegation's visit to AXA, in-depth discussions were held on enhancing the commercial coverage of inclusive insurance and promoting its viability within the ecosystem of inclusive finance.
3.Recommendations
First, it is important to promote the integrated development of impact investing, SRI, sustainable investment and ESG investing in China. Although these concepts originated from overseas, China has been actively practicing them since the reform and opening up. Moreover, these concepts align with the new development concept put forward by China in the past decade. To achieve high-quality development, it is necessary to conduct theoretical analysis on the definitions and extensions of impact investing and other related concepts. These concepts should then be integrated into specific projects undertaken by corporations and financial institutions to facilitate the integration of these investment strategies.
Second, actively participating in the formulation of international norms for sustainable development. In recent years, the Chinese government has been actively promoting high-quality economic and social development and has integrated the 17 UN SDGs into its national development strategy. Against this background, the disclosure of sustainable development information becomes increasingly mainstream. Meanwhile, It is important for China to contribute its wisdom and solutions to the formulation of relevant international standards. Additionally, clearer policy guidelines are needed for China's participation in international impact investing evaluation standards. Strengthening international exchanges in this area will allow China's relevant policies and practices to be effectively communicated, fostering mutual understanding and deeper collaboration.
Third, it is essential to strengthen international dialogue and cooperation between the government and civil society organizations (CSOs). This can be achieved by maintaining communication with relevant OECD task forces and enhancing the disclosure and interpretation of innovative financial products from the perspectives of financial consumers and investors. Active participation in OECD research and academic studies will guide the innovation of financial products and services in China, improve the foresight of policymaking, and ensure the stability of the financial system. Additionally, maintaining contact with international CSOs, including the GSG, is crucial. Efforts should be made to encourage Chinese representative organizations to join the GSG network. We shall give full play to the role of IFCII, strengthen cooperation with relevant domestic organizations in this regard through capacity building and the establishment of a special task force, and strive to enhance China's voice in international impact investing.
Fourth, attracting international financial institutions to invest in China's green and sustainable development field is important. During the survey, companies shared their experiences and strategies regarding insurance funds' participation in sustainable investment. They expressed strong interest in engaging in sustainable investment in the Chinese market. Strengthening contact and cooperation with more multinational corporations and financial institutions will facilitate the introduction of additional overseas investments. This will promote the integration of sustainable investment and inclusive insurance, serving vulnerable groups and small and micro-enterprises. It will also better illustrate the social benefits of investment and contribute to China's green and sustainable financial development.
Fifth, highlighting the inclusiveness of impact investing and sustainable finance is crucial. In the areas of inclusive insurance and green finance, Chinese firms and financial institutions should maintain exchanges and cooperation with multinational corporations that possess practical experience. This collaboration will facilitate the coordinated development of related businesses with multinational corporations operating in China. Actively drawing on international experience and leveraging the advantages of pilot financial reform zones, identifying target service recipients, studying their specific needs, and implementing pilot projects are important steps. Guided by the SDGs and with support from ESG and impact investing, the integrated development of green finance and inclusive finance can be promoted. This approach will foster financial inclusion and shared benefits while advancing green and low-carbon development.
Authors
Jizhe Ning, Vice-chairman of the China Center for International Economic Exchanges
Duoguang Bei, Chinese Academy of Financial Inclusion (CAFI) at Renmin University of China
