China Investment Corporation (CIC) is enhancing its sustainable investment capabilities for both overseas public and private market exposures, capitalising on the global green transition momentum.
CIC employs a quantitative approach to sustainable public equity investing, leveraging its quantitative platform and extensive ESG data analysis. The sovereign wealth fund noted that sustainability data is generally more accessible for stocks compared to other asset classes.
It is piloting this approach through a self-managed green and low-carbon portfolio. This initiative explores equity decarbonisation pathways to support sustainable investment objectives across its overseas exposures, according to its 2023 annual report released on Sept 27.
“Since launch, the portfolio has shown robust performance while contributing effectively to carbon reduction goals,” the fund said. “Systematic evaluation of its philosophy, products, processes, personnel, and performance indicates readiness for scale.”
As of the end of 2023, CIC’s total assets under management (AUM) stood at $1.33 trillion. The fund does not disclose the size of its overseas exposure, which is estimated to be about 40% of the AUM, with the remainder consisting of long-term equity holdings in 19 state-owned financial institutions in China.
As China accelerates its efforts towards carbon peaking by 2030 and net zero by 2060, CIC, as a sovereign investor, is enhancing its portfolio management towards sustainability.
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“As global momentum for green transition builds, CIC is enhancing its sustainable investment capabilities, leveraging our position as a sovereign wealth fund to lead and catalyse cross-border investment cooperation in this crucial area,” the fund stated.
INCREASED ALLOCATIONS
In private markets, CIC has deepened its focus on sustainable opportunities, including green impact funds, climate change-focused funds, and forestry carbon sink projects, while increasing targeted allocations to its sustainable energy strategy.
In public markets, CIC has increased allocations to sustainable equity strategies and sustainability-focused managers.
For externally managed mandates, it has implemented customised ESG assessment frameworks across asset classes. Approximately 64% of CIC’s overseas assets were managed externally.
CIC has been developing its own model for sustainable investment in recent years. It is currently integrating climate change considerations across the entire investment lifecycle — from asset allocation and risk management through project screening, due diligence, and decision-making, to post-investment management and project exits.
The fund has updated its proprietary ESG model, completed research on carbon futures, and established positions in proprietary global allocations.
It also initiated a carbon data audit of underlying assets, launching carbon intensity analysis for its public market portfolios, and evaluating the feasibility of carbon measurement for private market holdings.
BIOFUEL INVESTMENT
CIC highlighted its investment in an innovative waste-to-biofuel company in Asia, in collaboration with other partners.
Recognising that biofuel development offers an effective solution for reducing carbon emissions, CIC is supporting the company’s productivity expansion and market growth across the region.
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The company produces high-quality biofuels, including biodiesel, sustainable aviation fuel, and bioethanol.
“Biodiesel and sustainable aviation fuel technologies are mature and highly compatible with existing vehicles and aircraft, making them a primary viable pathway for emissions reduction in transportation, especially aviation,” CIC noted.
The fund believes the investee is “well-positioned” to perform as the world races towards net zero targets with increased biofuels demand.
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