As more and more people pay attention to long-term investment, investing in ESG has become an important trend in the era of sustainable development, Hillhouse Capital founder Zhang Lei said on Wednesday during the BEYOND Virtual event. Zhang added that sustainable investment not only requires investment institutions to consider ESG in their investment targets but also requires long-term capital to support outstanding companies.
On Wednesday, the BEYOND Expo 2022 opened online at BEYOND Metaverse. As Asia’s largest and most influential tech event, the Expo will have more than 40 talks and panel discussions where leaders and experts across sectors dive deep into the topics of consumer tech, health tech, global investments, sustainability, and Web3.
Please find below the transcript of the opening day speech from Zhang Lei, founder and CEO of Hillhouse Capital. The following transcript has been edited for clarity:
Good morning! It’s my great honor to meet all of you at BEYOND Expo, 2022. The theme of the expo is “What’s Next”. I’m invited to share my opinions about the future. In the face of current changes and uncertainty, everyone hopes to find the “gold key” to solve the problems.
We actually see more and more people pay closer attention to long-term development, climate change, and social responsibility. ESG has become a certain future. According to the data statistics, the global ESG investment scale in 2020 reached around $100 trillion, a 14-fold increase compared with that of the year 2006.
Hillhouse Group, as an innovative industrial investment institution, is always insisting on the philosophy —“to invest for a better world.” On the one hand, by exploring optimized resource allocation, we pursue environment, justice, society, and other long-term values. On the other hand, we choose fellow travelers with great insight to achieve a win-win result of social value and economic value through sustainable innovation.
I believe the most sustainable ESG investment will surely become a more important trend and create great value. So, in this era of sustainable development, what can we institutional investors do? I’d like to share my ideas with you.
First, the foundation should be strengthened. Just like the basic support of new infrastructure, the entire internet networking and data center, for example, to the digitization of industrial manufacturing industry and intelligent industry, the ESG also needs the support of infrastructure, including the establishment of data quantification, information disclosure, and valuation systems.
Institutional investors can, during the management of investment process and the selection of investment targets, take the ESG into consideration, and through self-build capacity and investment cooperation, especially the digital capacity, to build the ESG infrastructure in your investment ecosystem and the sustainable database.
We can introduce a digitized ESG performance system for many corporate investees, which will help relevant corporate investees to collect their ESG data and do industrial benchmarking. Thus, an information disclosure system that meets international standards will be established to help investees lay a foundation for sustainable development by leading investees to collect and accumulate data.
Meanwhile, as an Asian framework to strive for evaluating carbon emission reduction performance, we at Hillhouse also adopt the quantification method. As for reducing carbon emissions, based on the carbon criterion of product and technology, taking the growth prospects and our carbon emission anticipation, the whole carbon emission reduction pattern is formed. By estimation, our understanding about each carbon emission reduction path and efficiency helps the group discover the industrial value and promote new perspectives.
And under the background of carbon peaking and carbon neutrality, only by making the carbon emissions clear can we shoot the arrow right at the target of its reduction.
Hillhouse invested in the first provider in China who focuses on the solutions to carbon emission management software and consulting, deploying infrastructure service of carbon neutrality to help more enterprises make carbon emission reduction plans with a high input-output ratio, to realize efficient tracing and disclosure of carbon emission reduction results.
Second, innovation should be insisted on. We always believe that technology is an ultimate solution to sustainable development. During this process, what institutional investors should do is to support technology innovation and green technology with long-term funds in terms of key domains and key phases of sustainable development, to encourage and attract more institutions to play a role in and support technology development. Thus, an assembly effect of innovation will be formed to finally solve social and environmental problems during the development process.
In terms of carbon neutrality, for example, by comprehensive research and profound insight and selection of industries with key influence on and significance to the promotion of carbon neutrality, we discovered those excellent companies that can solve their key problems by technology and business model innovation. We invest in them, empower them, and continuously help them to grow.
We recently invested in a company developing perovskite and gold laminated photovoltaic cells. We help the group overcome the “Death Valley” of primitive technology innovation from 0 to 1.
And based on our DVC, Deep Value Creation, a low-corruption after-investment service system, we support their R&D engineering talent expansion and help their connection of industrial resources so that they will indulge in the industrialization of photovoltaic industry.
Finally, talents should be focused. Talents are always precious resources. The booming ESG market will surely trigger heavy demands for ESG talents. To my knowledge, the total number of American companies that hired Chief Sustainability Officers in 2020 exceeded that of the previous three years.
As for industries, we published a research report to list investment opportunities in 8 key industries realizing carbon neutrality, including electricity, transportation, industry, new material, architecture, agriculture, negative carbon emission, information communication, and digitization.
Numerous professionals are needed. According to International Energy Agency, up to 2030, clean energy investment driven by carbon neutrality will create 14 million working posts. As the data show, in the past 5 years, recruiting numbers for green skills globally increased by 8%, several times that of the GDP growth rate, while obvious vacancies show in terms of talent supply.
In the future, like finance and HR departments, the carbon management department will become a basic functional department. We need to pay special attention to the topic of sustainable development and put forward new requirements to the talents.
The ESG involves climate, society, governance, technology, and even finance, so it’s not enough to master the knowledge of only one industry. Talents shall have international insight. Those compound innovative Carbon Talents with multi-subject knowledge and insight will definitely become the real core in the process of sustainable development.
Last year, Hillhouse, together with more than 10 investees, including CATL, LONGi, BYD, and Carbonstop, which are also representatives in the field of carbon neutrality, held special carbon neutrality job fairs in several universities across the country.
This year, we will join hands with 42 manufacturing companies to hold joint on-campus job fairs. We hope that with our talent empowering service, we can help investees find better Carbon Talents to provide core impetus to the sustainable innovation of enterprises.
Sustainable development is related to the future of every one of us. Hillhouse is willing to play a key role in the promotion of prosperous sustainable development and be a partner in the practice of ESG.