Jane: [00:00:00] Welcome back, everyone, to the LSEG Sustainable Growth Podcast. I'm Jane Goodland your host. We have got some very exciting speakers coming up this year for you. And to kick us off, we're going to be talking very shortly to Helena Fung, who heads up sustainable investment for LSEG in the Asia Pacific region. And we’re going to hear about some of the regional differences when it comes to sustainable finance, and also the recent partnership with Ping An which is China's largest insurance company, and we’ve come up with some really new and exciting ESG, China indices, so we’re going to hear all about those, so let’s get stuck in
Jane: [00:00:44] Hello, Helena. Really lovely to see you. I've been looking forward to chatting to you for ages. So welcome to the Sustainable Growth Podcast. Let's start by finding out a bit more about you. Can you just tell us about your role? And I think you're based in Hong Kong, right? So, tell us about your role and what's it like over in Hong Kong today?
Helena: [00:01:03] Thank you, Jane. It's lovely to see you. Good to be here. And thank you for inviting me to join you on the podcast. So I am, as you said, based in Hong Kong. I've actually been here for quite a long time, but with FTSE Russell for three years in Asia and in Hong Kong. It's actually pretty cold today. This is what we would think of as winter. So, it's about 14 degrees, which in Hong Kong terms …
Jane: [00:01:23] It sounds delightful to me, frankly, right now.
Helena: [00:01:26] Yeah, but we're all coming back after Chinese New Year and getting back into the swing of things.
Jane: [00:01:32] Good. Excellent. So, tell us about what you do for FTSE Russell and LSEG over there.
Helena: [00:01:36] Sure. So, as I said, I joined FTSE 3 years ago as head of sustainable investment for the business for the Asia Pacific region. And in that time, I have had the privilege of leading, I guess, the strategy and building a strategy for the region, executing on it, hiring a great team. So, we have a head of sustainable investment in Sydney, which is a really important region or the Pacific region is very important from a sustainability perspective. So, there's lots of very interesting things to be done there. Tokyo also we have a head of sustainable investment and again, Japan is another very forward-looking region, part of the region for sustainability. And I think the important thing to remember about Asia Pacific is that it's very fragmented in terms of its approach to sustainability. It's fragmented from a regulatory and investment perspective as well. We've got a whole swathe of emerging markets, more developed markets like Singapore, Hong Kong, and Japan. So really, you know, thinking through the regional strategy, understanding what sustainability means to the different actors in the markets.
Jane: [00:02:40] You must have a super interesting job. And it's fascinating. Like you say, I think we're too quick to bunch APAC countries into one group. And like you said, it's actually quite fragmented and very different. Can you draw out some of those differences for us so that we can get a flavour of what the main differences are, maybe within APAC, but also in contrast to other economies around the world?
Helena: [00:03:05] Sure, well, if you think about the spread of countries within APAC and I've just mentioned a couple of them in particular the more developed markets, but then think about China, for example. I mean, China's the world's second largest economy. At the same time, it's also the largest emitter of carbon emissions and yet still an emerging market. So, if you think about the difference between a market like China and then thinking about Singapore and then the markets within ASEAN, which again have their own very specific culture way of doing business, economic concerns, regulatory and financial frameworks. So, if you draw all of that together, you really have to take a market-by-market approach, when you're working with the participants and the investors and the policy makers to talk about and to help to promote and raise the visibility of sustainability on the agenda, but also to provide the tools, the instruments and the solutions that clients need to be able to implement sustainability effectively across portfolios.
Jane: [00:04:01] And you mentioned that there's we've got a presence in Australia and going back several jobs ago, actually, I worked for an investment consulting firm and worked a lot with some Australian institutional investors and I certainly found those organizations to be actually really forward thinking in terms of sustainability. I guess maybe it's because it's an economy that is characterized by a lot of heavy industry and resource intensive, so I guess it really depends, doesn't it, like country by country, what the economy is focused on really shapes how sustainable investing is framed in that particular country. So, definitely different. In terms of I guess what we're seeing from those asset owners. And by that, I mean the big institutional investors. Have we done any work to kind of understand those nuances, country by country or Asia versus the rest of the world? I know that we do surveys occasionally, don't we?
Helena: [00:04:59] Well we do. And we published towards the end of last year an updated asset owners survey, which is something that FTSE Russell has done for quite a number of years, which provides some really interesting insights into the development of thinking on sustainability and to what's most important to the asset owners within each market. As you'll know very well, Jane, the asset owners are really important from an investment standpoint in terms of setting the tone and the expectations and driving forward sustainability in a market. And that then tends to filter down to the rest of the market participants through the asset managers, to investors and so on. So, in that sense, it's very interesting for us as a firm to be able to observe some of the changes and the shifts in the landscape around how asset owners in particular are approaching sustainability. And the survey itself I think was very interesting this year because we had an increased number of participants from APAC. And I think one thing you have to bear in mind about APAC, as we've said, the markets are very different and you mentioned Australia, which has a large number of obviously the super funds, but within the rest of Asia you find some fairly large pots of institutional money, but not to the same level that you might do, say for example, in the Netherlands or in other places in Europe where there are a lot of very established pension funds. So again, you get that differential between those asset owners and institutions that are relatively new to approaching sustainability. And then the funds that are maybe further down that road and that journey. But it was really interesting last year in particular to observe some of the outcomes from that survey in terms of what is driving sustainability, how that's different from Europe. So for example, and I'll call out a couple of aspects from that, when we saw what was driving forward sustainability from the APAC asset owner perspective, I think we saw in particular that the opportunity side was very important within the Asia Pacific market and the asset owners in terms of understanding where they could put their money that was going to give them greater exposure to some of the upcoming investment opportunities, I think particularly on the green and the environmental side that would give them exposure.
Jane: [00:07:03] Does that contrast with other asset owners in other markets who might be more focused on risk management?
Helena: [00:07:09] Exactly. And interestingly, I think that chimes very well with what we've seen in terms of allocations. The importance of channelling finance to some of those newer solutions that are going to help to really drive forward transition and transition is a very important theme in itself in APAC. This is the need of these markets to transition and from what is in many cases or can be quite a carbon intensive economy. So, it's very interesting to see that piece, I guess, coming forward more perhaps than the risk management. And then also the reputational risk side in the survey was less of a concern for APAC based asset owners. So, I think these things are also significant. Something else I call out in terms of thematic focus and interest, I think we saw a shift in the last survey towards climate as a main driver from a sort of thematic standpoint, which I guess plays into that piece about the opportunity set in sustainable investing. So really the environment kind of coming forward and maybe that retrenching a little bit in some of the more developed areas and maybe the social themes coming through. Now, again, I don't think that means that asset owners elsewhere are less interested. I think it may is an indication that some of those themes are quite well developed in terms of how they're implemented in asset owner portfolios in other markets where maybe there's a longer track record of implementing sustainability policies, whereas this is something that's really now front of mind for Asia based asset owners, which is tremendously encouraging for us to see.
Jane: [00:08:38] Great. I mean, that's so fascinating. And I think one of the things that we talk a lot about and we try to advocate for is greater transparency and disclosure as a real helpful underpin to be able to invest more sustainably so investors really start getting access to the data and the information to help inform decision making or indeed engagement between investors and the companies where they're putting the money. So I think that we will continue to be looking at the state of disclosure and disclosure I think has come a long way in terms of if you just think about disclosure of scope one and two emissions, for example, in some more developed economies. But let's just talk about what happens in some of the more emerging markets and in the Asia-Pac area. On disclosure, are we seeing what we need or is there still big gaps?
Helena: [00:09:29] I think the honest answer to that, Jane, is we're seeing an increasing focus, particularly from policy makers, stock exchanges and regulators, on the importance of disclosure and on putting frameworks in place that will incentivize and encourage that. We're seeing a lot of standardized questionnaires or sets of questions that regulators and stock exchanges are starting to mandate. So I think from that perspective, there's a great focus. The reality is there's a big difference between some of the developed and emerging markets and between those markets where sustainability is more developed and those that aren't. And the other thing I would say is the standardization of data and the recognition of a need for comparable and consistent data.
Jane: [00:10:15] Yes. It’s so important isn’t it. Because, I guess from an investor's perspective, running perhaps a global portfolio, actually, it becomes really tricky if you've got good, good data in some areas and then an absence of data elsewhere to actually manage a portfolio on consistent data. So, I can see how that's an issue. One thing that I think super interesting that I'd love to talk to you about is the partnership that FTSE Russell entered into and announced just in December 2022. And that's the partnership with Ping An. Super fascinating. And I'd love to hear more about how the partnership evolved. But before we get into that, perhaps you can just share the top lines around what the partnership is and what it's resulted in.
Helena: [00:11:00] Yeah, Thanks, Jane. I'd be delighted to. Well, the partnership is essentially work we're doing with Ping An. Now they have and to your point around sort of missing data and the absence of data in some markets. Ping An have come up with an ESG score for all Asia for all Chinese a-share companies and about 4000 companies in the market, that takes into account the specific circumstances of what ESG looks like and means in China to Chinese companies, bearing in mind that it is a very individual economy and has its own concerns and framework. So basically what we've done is partner with Ping An to use that score and rating within a set of China ESG indices. So that's the top line of that partnership is really taking the score that they've developed specifically for Chinese companies and then using it in FTSE Russell’s market leading China index series. So, it's a very exciting partnership for us and I think really novel and in that sense of bringing together our international index-building capabilities and Ping An's domestic ESG China insights.
Jane: [00:12:03] And for those who aren't familiar, who is Ping An? What is it?
Helena: [00:12:07] Thank you. Another great question, because Ping An is extremely well known in Asia. It is one of the largest insurance companies in the world. It's an enormous financial conglomerate. An asset owner on the insurance side in its own right with very significant assets under management. But it also has a number of different financial arms, including a technology arm that we are partnering with in terms of using the rating that Ping An technology have created for use within the insurance asset owner side as well.
Jane: [00:12:35] Okay. So, a big player and an important one to work with. So how did it come about? Is it kind of my people speak to your people or how do these partnerships come about? Because they sound like a massive organization to navigate. And I can imagine it's not necessarily an easy thing to broker. So, when did it start and how did it come about?
Helena: [00:12:56] Well, it started at the end of 2020. And as you saw, as you've mentioned, we launched the indexes last year. So yes, it is no small undertaking to develop these partnerships. It came about really because I was very aware and I mentioned the regional strategy, that there were some very interesting capabilities developing in China looking at Chinese companies and their ESG performance in that very kind of specific way that isn't always captured by international methodologies. And really it was about making the initial contact, somebody reaching out to somebody within Ping An. And I was delighted when they came back and said, yes, we'd be happy to talk to you. So that was really how it started. And then it was a very long and fruitful discussion from that point. But we found that we have a lot in common with Ping An in terms of the approach to ESG and sustainability. I mean, they're really trying to drive this forward in the market because they're obviously a big asset owner in China. And as you know, Jane, FTSE Russell in particular has always been a very strong advocate of driving forward ESG in markets, partnering with groups like the PRI, which is really what Ping An are also doing in China. So, there is that very synergistic approach between the two groups and what we're trying to achieve.
Jane: [00:14:08] And like you say, FTSE Russell's been at this for a long time. I think it's something like over 20 years ago, the first FTSE for Good Index series was launched. Can I just ask probably a bit of a cheeky question, but when you're partnering with a with a big Chinese organization like this, which language do you use, or do you have to use translators? Now you're going to tell me that you're fluent.
Helena: [00:14:32] Well, I don't speak Mandarin, but fortunately, the people that we deal with in Ping An all speak very good English. So, it's been fun.
Jane: [00:14:40] So lucky for you. And so, I guess it's quite a new launch. So, it's early days, but what's the reception been like so far? Have you got interest in the index?
Helena: [00:14:50] Yeah, it's created a lot of interest and it's had a very warm reception and some very positive feedback. And I think in particular from that top line of, I guess the international partnership with a domestic Chinese player and that willingness to understand and to interpret ESG through a local lens as well. So from that perspective, after the launch, we had some really very warm feedback. We've had some interest from investors as well, but it is very early days. We have only just launched the index series and we do plan to do a lot more with it. So what we did was launch an initial two indexes and then there are further index launches to come.
Jane: [00:15:27] The subsequent ones, are they kind of variation in terms of market cap that's included in the index or how do they differ from the initial ones?
Helena: [00:15:35] Well, we built these initial two indexes using the FTSE China A Free indexes, which are the onshore indexes for Chinese clients. So, these are for use on the mainland. The intention is then to build also offshore equivalents as well for use by international investors and then also to look at other asset classes like fixed income, for example, over time. But it's a long-term partnership. So, we have time to do that, which is great.
Jane: [00:16:00] That kind of answered one of my other questions was about who the primary client base might be for these indices. And actually, you talked about the fact the onshore versus offshore, but I should imagine that this is going to be of interest to international investors wanting to get access to Chinese companies, but with an ESG lens. I can't imagine that there wouldn't be interest for this kind of product.
Helena: [00:16:23] Well, that's exactly right. And that was also our thinking, Jane. I mean, if you think how important China is from the perspective of supply chain, from the perspective of an investment opportunity, certainly investors are interested and keen, I think, to get exposure to China. And we've talked about data and the fact that data isn't always forthcoming, you can't necessarily assess Chinese companies in the way that you would assess companies, perhaps in other jurisdictions where there is more data, where the legal frameworks are different, where the drivers, the incentives for implementing sustainability may not be entirely compatible or consistent with what happens in China, where everything is often very much policy driven and led and opening up those specific opportunities through these ratings, which also look at what we would think of as kind of like a green economy or green revenue type perspective, I would think would be of interest to any investor that wants to have exposure to China, because as we know, sustainability is becoming not only mainstream, but it's becoming really critical as a lens to risk and to opportunities. So, I mean, I do feel these will be universally relevant and hopefully also to an international investor as well.
Jane: [00:17:33] Earlier you mentioned that under the partnership Ping An provides the ESG scores. So, I was just thinking that in this particular partnership, companies, Chinese companies perhaps maybe then stimulated to start understanding why they are or are not included in the particular indices from an ESG perspective. So, I guess it might drive greater interest at the company level about transparency and ESG performance, etc. Which is a good thing. But presumably the companies would be connecting with Ping An to ask those questions and not FTSE Russell, in this in this particular situation.
Helena: [00:18:12] Well, that's an interesting point. I mean, Ping An, I think have a process of engagement as do we actually see as you know, over the ratings of companies. So we do exactly, as you say, seek to educate and to inform with the ratings and to provide that bridge between investor expectations and what companies are doing on the ground. So, yes, I mean, that's certainly an interesting scenario. I think we'll have to see how that goes over time. But you're absolutely right that benchmarks like these have been very important incentives for companies to want to change their sustainability performance and what they're doing on that. And that's fair. And we've seen that very clearly in other markets as well. And yes, we would like to think that that's going to be an eventual outcome from this as well as that it gives companies that level of incentive to be able to have eligibility to the index.
Jane: [00:19:01] And a final question, if you don't mind, because I think it's kind of an obvious one. That China, sometimes it's a bit of a conundrum, on a sustainability front, because in some respects it's providing great solutions to some sustainability challenges. But on the other hand, there still are concerns with some of the practices that are ongoing in China. And I suppose just a thought from you about how do you think about this? Why is it so important that we don't just kind of disengage? It's more a case of why is it so important for us to be working in China with Chinese players?
Helena: [00:19:34] I think it's incredibly important that we do retain that level of connectivity and dialog. And look, I mean, we've seen that even on an international, let's say, policymaking level, we've seen China and the US and other economies and jurisdictions work together on some of the really important issues. Climate is an obvious one where the US and China have led the G20 working group. So, it's definitely something where different investors, policymakers in different regions are able to come to the table and discuss some of these very significant issues, and it's important to do so in a way that's constructive and takes into account the different circumstances, cultures, I guess, pressures and requirements of the different economies that people operate in. So, from that perspective and that's really, I guess what this index series aims to do is to make sure that there is that level of connectivity, as I mentioned. China is such an important economy. It is part of global supply chains. So, if you think about the scope three emissions that come from China, it's very hard to separate, I think on a regional basis, the performance of companies and to think only about one region or jurisdiction at a time because there's so much interlinkages between global supply chains, between the way that business is done and the issues that we seek to solve in sustainability are not, necessarily specific to one country. I mean carbon emissions are global. China has a significant portion of those, but it's a global problem. And I think we solve those really by working together in this kind of constructive manner. So hopefully, it's a big ambition, we can play our small role in that.
Jane: [00:21:15] I couldn't agree more. I think you hit the nail on the head when you said, sustainability issues are global, we co-own them. We have to come up with the solutions together. And collaboration is fundamental to actually getting this right. And the time is now. So, thank you so much. It's been fascinating talking to you. And I just think you've got the coolest job ever. I absolutely do. If I'm in Hong Kong, I'm going to look you up and hopefully we can have a coffee and I can pick your brains more. I could talk all day to you. Helena, thank you so much. See you again soon. And thanks for your time.
Jane: [00:21:50] So that's it for this week's episode of the LSEG Sustainable Growth Podcast. That was a fascinating chat. I'm sure you'll agree. If you're not already following us. Please do follow and rate us on Spotify, Apple Podcasts, or wherever you get your podcasts. If you have questions, comments, or someone actually that you'd like us to talk to, then do drop us a line at fmt@lseg.com and we'll see you next time.
