China Investment Corp. turning its back on countries suspicious of SWFs, adopts SRI approach
Posted by Editor on June 13, 2008 at 06:58 AM
Thomson Reuters reports that, “China Investment Corp is turning its back on countries that are suspicious of sovereign wealth funds, Gao Xiqing, CIC’s president and chief investment officer, said on Friday. Gao told a mergers and acquisitions conference that CIC ‘has a problem’ that countries are defining more industries as strategically important.”
The article also quotes Gao as saying that, “We are looking at clean energy and environmentally friendly investment. (We are) looking at everything cross-border except for casinos, tobacco companies or machine gun companies.” This interest in socially responsible investing (SRI) suggests that CIC is indeed following the Norwegian SWF model, as Gao said it would during his 60 Minutes interview.
It should be noted, though, that the use of investment screens based on non-financial criteria and the targeting of areas favored for non-financial reasons are likely to open up CIC to further charges of political influence (as, for example, with the political battles in the US in the 1990s over economically targeted investments by pension funds).
Its adopting SRI could see CIC coming under pressure from Western activists as a possible ally in various social and environmental causes.
And it could also see CIC’s returns weighed down by various opportunity costs or even losses from socially and/or environmentally responsible but ultimately bad investments (note, for example, CalSTRS recent reconsideration of its expensive decision in 2000 to divest in the tobacco industry and recent warnings that clean-energy investing may be showing signs of bubbling over).
Comments
There is 1 comment on this post.
Interesting article. As far as I’m concerned the more that investment entities of all stripes subscribe to socially responsible investing – the better it is for all of us!
I believe that if everyone (funds, investment managers too) invests according to their values, then, since so many of our core values are alike – and are supportive of higher ideals – that in the long run, only companies employing these higher values will truly prosper.
Well done China Investment Corp.!
Incidentally, I’ve been following socially responsible investing for some forty years and the interest in the subject in recent years has, as you probably know, grown immeasurably.