Asian insurance giant bets on China ESG assets as tech flounders

ONE of Asia-Pacific’s biggest insurers sees opportunities in ESG-themed equities and bonds in China as technology loses its appeal as a sustainable investment haven.

AIA Group, which had invested heavily in Big Tech, is now overweight Chinese equities and favours solar, wind and electric-vehicle assets, chief investment officer Mark Konyn said in an interview.

“We’re going to see a very, very significant shift in the energy mix over the next 5 or so years,” Konyn said, referring to changes in the alternative energy and transport sectors. Green and sustainability-linked bonds “are not a significant part of the programme today, but we are looking to get out to the market and let issuers know that we are interested in those types of issuances”, he said.

Hong Kong-based AIA, with US$250 billion in assets under management, has 10 per cent of its portfolio in equities and 80 per cent in fixed income. The group is “significantly underweight” China in the Asian offshore bond market, which is dominated by property developers, but has a dedicated portfolio for funding sustainable infrastructure in the region.

The Chinese ESG play has been bumpy of late. Shares of solar giants tumbled last week as allegations of forced labour in the industry’s supply chain spread to Europe, their largest export market.

Meanwhile, the traditional energy sector has come roaring back. China’s best-performing ESG ETFs this year have major emitters like China Petroleum & Chemical and PetroChina as their top holdings, Bloomberg Intelligence analyst Michelle Leung wrote in a note on Tuesday (Sep 20).

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Konyn said tech is no longer a haven for investors in the environmental, social and governance (ESG) space. Big tech names have been a drag on ESG funds this year, amid rising concerns about inflation and slowing economies. Past emerging market favourites like Tencent Holdings and Alibaba Group Holding have fallen more than 30 per cent this year, exceeding the 22 per cent drop in the MSCI Asia-Pacific Index.

“It’s been a fairly easy ride,” he said. “You could show outperformance and at the same time, display your ESG credentials. I think that set of circumstances has now changed.” BLOOMBERG