China’s ESG investing challenge
East Capital co-founder Karine Hirn began her investing career in Russia in the 1990s before moving to China to head up the firm’s Asian expansion. She discusses the challenges of the Chinese market, why eastern Europe has the edge on corporate boards and why governance is key to ESG.
The unstoppable rise of environmental, social and governance (ESG) investing since the signing of the 2015 Paris Agreement has been largely about climate. Then, with the start of the Covid crisis last year, social issues came to the fore.
However, for veteran emerging market fund manager Karine Hirn, it is the G that is by far the most important of the three letters.
“Everything starts with governance,” she says. “If governance is bad, then the chances are that the environmental and social sides will be bad as well.”
Hirn has had plenty of experience of sketchy corporate governance. East Capital, the investment firm she co-founded in 1997, was one of the first Western equity funds to offer retail investors exposure to the former Soviet Union.
More recently, she has shifted her focus further east. In 2010, she moved to Shanghai to head up East Capital’s expansion into Asia. Now based in Hong Kong, she is also responsible for coordinating the firm’s approach to ESG, having taken on the newly created role of chief sustainability officer in 2019.
On the face of it, China seems a more natural venue for a CSO.