Global index publisher FTSE Russell and Chinese financial conglomerate Ping An announced a partnership on Thursday to promote sustainable investment, launching a series of China indexes integrating environmental, social and government (ESG) considerations.
The strategic partnership comes as global investors grow increasingly ESG-conscious, and Beijing accelerates a green push to help meet the government's carbon neutrality pledge by 2060.
The FTSE Ping An China ESG Index Series, which combines Ping An's China-specific ESG approach into FTSE Russell's China indexes, shows how Chinese and western institutions can join hands in sustainable investment, despite tensions over sensitive areas such as human rights and Communist Party control.
The initial index launch will target onshore investors, but the multi-year partnership aims to ultimately serve international investors as well, said FTSE Russell, a unit of London Stock Exchange Group (LSEG.L).
Ping An Insurance Group (601318.SS) is China's largest insurer by market value.
"It's really about leveraging the market-specific insights" that Ping An brings, said Helena Fung, Head of Sustainable Investment, APAC at FTSE Russell.
Fung added that Ping An's own ESG evaluation framework, on which the new indexes are based, contain idiosyncratic Chinese elements such as "common prosperity" -- a government push that seeks to eliminate growing wealth inequities -- but that didn't cause discord with FTSE, which has its own ESG rating standards.
"People tend to think of ESG as one approach. In fact, you're looking at different methodologies, different ways of applying the data within indexes," Fung said.
Underscoring such divergence, Sustainalytics, the ESG rating unit of U.S. financial services group Morningstar, downgraded Tencent Holdings, Baidu and Weibo Corp earlier this year over their role in China's expanding control of its internet.
In China, however, internet censorship is not factored into ESG considerations by domestic institutions.
The fissure could widen as Beijing promotes corporate governance with Chinese characteristics, with President Xi Jinping strengthening Party control among state-owned enterprises (SOEs).
The Chinese government has in recently months been promoting its ESG disclosure framework for listed SOEs.
More harmony with the West is seen around environmental issues. In August, China raised the bar for issuances in the country's green bond market, taking a major step towards adopting global standards.
"The environment has been a great consideration and concern in China, which is not at all at odds with an international perspective," FTSE Russell's Fung said.
Rival index publisher MSCI (MSCI.N) said in its 2023 ESG trend report that, following reopenings globally from COVID, focus "quickly shifted back to tackling climate change and attention there grew substantially, especially in China."
