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China on the world stage: What it means for responsible investors

EdenTree Investment Management EdenTree Investment Management Responsible Asset Manager
EdenTree Insight reports

China on the world stage: What it means for responsible investors

EdenTree Investment Management


Responsible Asset Manager
24 Mar 2021

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Introduction

In the past 70 years, China has grown from an agricultural economy to one of the world's superpowers. As one of the world's largest manufacturers and exporters, it impacts many other global economies both directly and indirectly. As a responsible and sustainable investor, it is therefore crucial to have an understanding of China and the environmental, social and governance issues that it can bring.

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  Chapter 1

China's economic development

China's rapid rise to being a global superpower hinged on mass industrialisation throughout the late 20th century - it has resulted in China having a global influence and some of the world's largest companies. However, it is unlikely to have had such great an effect without the lack of worker's rights and without severe environmental destruction. This history is one of the key reasons why we, as responsible and sustainable investors, continue to monitor developments in China.

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  Chapter 2

The environment: an unambitious start, but China is getting greener

China's economic development has long been sustained by high levels of environmental destruction and pollution. However, there have been signs of a change in approach in recent years, with it now being the number one renewable energy producer and being one of the leading countries in renewable energy technology.

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  Chapter 3

Social issues: a long list of concerns difficult to navigate

While China's economic development has flourished, much of it has been as a result of social restrictions and human rights violations. When examining any company working under an authoritarian leadership, it is crucial to carefully examine every aspect of a business to ensure that supply chains, governance and many other aspects are clear of ESG concerns.

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  Chapter 4

Governance and business ethics

Governance has long been a major concern when examining Chinese companies. Due to the high influence the CPC has on business management and ethics, it is difficult to effectively engage on governance concerns. Steps have been taken in recent years to allay these concerns, but caution must still be taken by any responsible investor.

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  Chapter 5

EdenTree’s approach

EdenTree has long used a screen for oppressive regimes and has revised this screen to reflect the increasingly complex environment in which we invest. It is key for responsible and sustainable investors to seek out responsible businesses and to engage with them to help improve corporate governance, along with encouraging improved social schemes and environmental responsibility.

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Conclusion

It is clear that China's position in the global economy means that it cannot be ignored by investors given the opportunities present in the country. However, as we have examined throughout this insight, there are many aspects that will cause concern for responsible investors and challenges that will remain in the coming years.

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