Asian Insurance Giant Bets on China ESG Assets as Tech Flounders

(Bloomberg) — 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 Ltd., which had invested heavily in Big Tech, is now overweight Chinese equities and favors 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 five 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 program 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 $250 billion in assets under management, has 10% of its portfolio in equities and 80% 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 labor 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 Corp. and PetroChina Co. as their top holdings, Bloomberg Intelligence analyst Michelle Leung wrote in a note Tuesday.

Konyn said tech is no longer a haven for investors in the environmental, social and governance space. Big tech names have been a drag on ESG funds this year, amid rising concerns about inflation and slowing economies. Past emerging market favorites like Tencent Holdings Ltd. and Alibaba Group Holding Ltd. have fallen more than 30% this year, exceeding the 22% 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.”

©2022 Bloomberg LP

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