Carbon Footprints of the Equity Portfolios of Chinese Fund Firms

Under the dual carbon goals in China, the transition to a net-zero carbon economy requires massive amounts of capital, which must be provided and facilitated by financial institutions. Yet, there are no unified, publicly available disclosures of the investment carbon footprint of Chinese financial institutions, leaving them facing great climate-related risks. Here we demonstrate that the aggregated financed emissions show an upward trend from 2015, and the investment portfolios are more exposed to carbon-intensive assets, based on the equity portfolios of China's 105 fund firms. We further explore the decarbonization potential for fund firms and show that sustainability-aware fund firms are characterized by financed emission reductions and carbon efficiency gains. To fulfill sustainable investing, China's institutional investors should focus on investment allocations shifting to high-tech sectors and target the improvement of self-reported carbon emissions.

Jinglei Wang, Dabo Guan, Zengkai Zhang, Danbo Chen, Xiang Yu