Bo Bai: Making ESG into The DNA of a Fund


The inauguration ceremony of China's Impact Investment Network, with the theme of "All Things Recovered, Missions Remodeling", was grandly held online on April 15th, 2022. China Impact Investing Network (CIIN), initiated by China Social Enterprise and Impact Investment Forum, aimed to unite China's most ambitious and far-sighted leading institutions to explore ways to be better with forward-looking vision and innovative spirit. This forum brought together well-known investors, experts, and entrepreneurs in the industry, based on global capital, focused on the Chinese market, dug in-depth views, and comprehensively discussed the opportunities and challenges of capital-oriented practice in the new era.

Asia Green Fund (AGF) is the primary founding member of CIIN. Bai Bo, Chairman and Founder of AGF, was invited to attend this forum, delivered a speech "Reinventing Capital Mission" to share his insights on impact investment.

Based on more than ten years' deep understanding and practice in the Private Equityinvestment industry, Dr. Bai made a detailed interpretation of development trend of ESG.
He believes that there are four stages in ESG development.
The first stage is "Ignoring ESG". When ESG was first mentioned in the field of PE investment, it didn't attract enough attention, and then some dollar funds consciously participated gradually.
The second stage is "ESG PR". Investment institutions who concerned with ESG should focus on the dissemination of investment ideas and the publicity of invested programs.
The third stage is "Negative List". More and more investment institutions take ESG as the reference standard for judging deals, instead of just pursuing financial returns.
The fourth stage is "Impact Investment", the biggest different among the first three stages lies in exerting the power of capital. As a shareholder, the capital helping its portfolios to establish the awareness of influence, promoting the continuous improvement of portfolios in business practices, which is the significance and promotion effect of impact investment.

In the new era, establishing impactinvestment institutions and holding industry forums play a key role in China's PE investment industry. Dr. Bai also has his own unique views on how to establish a real impact investment institution.

He said that the key factor is to make the impact investment into the DNA of a fund. As an investment institution, our primary responsibility is fiduciary responsibility, which needs to be combined with the goal ofimpact. In the process of fund-raising, we made it clear with investors that we should not only make financial returns, but also realize the quantitative impact of the environment, covering the whole process of fund-raising, investment, post-investment management and exit. Select the subdivision track that can realize both financial return and social impactin the process of investment. In the process of due diligence, we should not only pay attention to the direction of financial and legal risk control, but also the direction of environmental and social impact, and even cooperate with third-party organizations to evaluate the impact. When building a business model for financial prediction, it is necessary to build a financial return model and an social impact model simultaneously. If the financial return of the deal is up to standard, but it does not have enough social impact, we will not invest. In terms of post-investment management, third-party organizations are hired again to audit and quantify the carbon emission reduction of the enterprises, so as to promote their development in the field of influence. AGF has been adhering to this purpose since its founding in 2016, aiming at establishing a truly impactinvestment institution.

In addition, he believes that China has provided fertile soil for impact investment. With the increasing attention of financial institutions and all sectors of society to impact investment, he is full of confidence in the future of China's impact investment and full of expectations for the development of CIIN.

The impact investment path is hard and long, and AGF is fortunate to meet the support and affirmation of investors on the road of exploration. In the future, AGF will join hands with more like-minded partners to focus on impact investment, promote the growth of outstanding Chinese enterprises through the power of capital, and promote the win-win development of society and environmental protection.

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