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Sustainable Investing Is No Different From ‘Value' Investing, Says Asset Manager

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Employees clean up solar panels which will be exported to Sudan at a factory on October 16, 2020 in Ji an, Jiangxi Province of China.

  • Sustainable investing is no different from the conventional "value" investing as both focus on long-term returns, said Yimei Li, CEO of China Asset Management or ChinaAMC.
  • ESG standards — or environmental, social and governance — should adapt to local circumstances, said Li.
  • Loh Boon Chye, CEO of the Singapore Exchange, cautioned investors against using ESG as a "simplistic filter" or "shortcut" to select funds and companies.

Sustainable investing is no different from the conventional "value" investing as both focus on long-term returns, according to an asset manager.

"Value" investing is a strategy that involves picking quality companies that appear to trade below their intrinsic value, and have the potential to do well in the long term.

Incorporating ESG factors can help investors to find such companies, said Yimei Li, CEO of China Asset Management or ChinaAMC.

ESG — or environmental, social and governance — refers to a set of criteria used to measure a company's performance in areas ranging from carbon emissions, to contributions to society and staff diversity.

"I do think that investment is [about] looking for the best value in the long run. And for fundamental investors, there's nothing more important than sustainable growth," Li told CNBC on Thursday at the virtual Sustainable Future Forum.   

Last year, ChinaAMC partnered Dutch asset manager NN Investment Partners to launch an ESG-focused global fund that targets Chinese stocks. She said the fund has done well and that over the long run, sustainable investments won't bring "poor" returns.

But ESG standards should adapt to local circumstances, Li added.

She explained that globally, governance standards typically stress having female representation on company boards, but that's "not that hard to achieve" in China.

Li said her firm has its own "localized" ESG rating to compliment international standards.

Not a 'simplistic filter'

Sustainable investing has become increasingly popular in recent years, but criticisms of the investment strategy have also emerged.

One critical voice was Tariq Fancy, BlackRock's first global chief investment officer for sustainable investing between 2018 and 2019. He said this type of investment can be a "dangerous placebo that harms the public interest."

Loh Boon Chye, CEO of the Singapore Exchange, also acknowledged that there were fallacies associated with sustainable investing.

He cautioned investors against using ESG as a "simplistic filter" or "shortcut" to select funds and companies. Instead, investors should evaluate whether a company incorporates sustainability into its business model and practices, he said.   

"One issue is ESG or sustainable or 'green' is often used as a catch-all bucket for different strategies, sectors and investments," said Loh, who also spoke at the virtual Sustainable Future Forum.  

Companies that understand risks around ESG and find ways to address them would be able to boost their financial returns in the long term, said the CEO.  

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