Monday, June 5, 2023

Exclusive – China to unveil new rules to rein in ‘greenwashing’ funds – sources

by Selena Lee and Samuel Shane

HONG KONG/SHANGHAI (Reuters) – China plans to tighten rules regulating eco-friendly, or so-called green funds, as part of its efforts to rein in ‘greenwashing’ in the world’s second-largest climate fund market is, said about the source case with direct knowledge.

The new rules, which could take place in the first half of 2023, would mark a major change in a fast-growing corner of the fund industry in China, where asset managers currently have the authority to determine the scope of green investments. ,

The rules could affect some or most of the green funds that now make up the bulk of the 160 sustainable products in China, forcing them to back up their green claims or drop popular labels, potentially boosting tens of sectors. prevent strong current in billions of dollars over the years.

Currently, China’s green funds operate only under comprehensive investment guidelines that came into force in 2018 and do not have a mandatory labeling regime. According to Morningstar data, the assets of such funds stood at $34 billion at the end of September.

The country’s fund regulator, the Asset Management Association of China (AMAC), has drafted rules that would require mutual funds or exchange-traded funds to keep at least 60% of their assets in a defined green investment category, which Qualify to be sold as green. products, sources said.

Under so-called ‘greenwashing’ funds make sustainability claims that are exaggerated or unverified.

AMAC’s rules will be subject to final approval from the China Securities Regulatory Commission (CSRC), said the sources, who did not wish to be named because they were not authorized to speak about the matter.

AMAC and the CSRC did not respond to Reuters requests for comment.

China plans to capitalize on the growing demand for funds based on environmental, social and governance (ESG) credentials, as regulators in the European Union, the United States and Britain step up the scrutiny of asset managers.

Climate change has become a pressing issue for China, the world’s biggest greenhouse gas emitter, which has seen its climate fund assets slide from a small base in 2020 and 2021 as President Xi Jinping said China would be “carbon neutral” by 2060. neutrality” will be reached.

According to Morningstar, which compiles global ESG fund data, China overtook the United States last year to become the second largest climate fund market globally after the European market.

In the first nine months of this year, 43 climate-themed funds were launched in China, a 30% increase in the total number of products since the end of 2020.

More than a handful of international asset managers, such as BlackRock and Fidelity International, whose funds overseas are already compliant with green standards, have entered China in the past two years.

The AMAC’s draft rules borrow from the 2021 edition of China’s Green Bond Catalog to define green assets, a semiotic scheme of classification. The catalog currently only applies to debt financing.

Under the new proposals, investments in programs listed on the list, such as energy saving and sustainable infrastructure projects, would be considered green investments.

(Reporting by Selena Lee in Hong Kong and Samuel Shen in Shanghai; Editing by Anshuman Daga and Muralikumar Anantharaman)

Copyright 2022 Thomson Reuters,

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