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Building an Impact Investing Ecosystem in China

By: Cissy Chen 10 Jan 2019

Before coming to HBS, I worked for a number of years in financial services in Asia. It was not uncommon for me to wonder what real benefit, other than to provide my clients with the ability to make more money, I was providing to the world. That desire is one of the reasons I wanted to come to HBS. I recently took the class “Investing in the 21st Century: Return, Risk and Impact,” taught by Professors Shawn Cole and Vikram S. Gandhi. Through this class I learned that my previous career could actually provide a positive impact on the world, and that impact investing is becoming more mainstream in the United States. There are many impact funds that manage to achieve market rates of return while at the same time generate positive impact. In the past decade, the ability to measure impact has improved, enhancing the investor’s confidence in this sector. 

Recently, investors in China have begun to show interest in impact investing. Over the next two decades, it is estimated that we will see USD 3.4 trillion of wealth pass on to a new generation of high net wealth families. Many of this younger, emerging group of wealthy individuals desire to make an impact.

However, impact investing is still in the very early stages in China, and lacks human capital, government support, and high-quality investees. There is a clear need to build a platform for Chinese investors. As a person who grew up in China and has been blessed to be able to attain an education at HBS, I feel a strong responsibility to do something. I spoke to the Managing Executive Director of Harvard Center Shanghai, Mr. Jing Huang, and he was very supportive of my desire. His view is that this is a meaningful discussion for the Chinese society, and very much in line with the mission of HBS. He was kind enough to host an impact investing conference on December 19, 2018 at Harvard Center Shanghai.

The emerging generation is passionate about making an impact in society

The event on December 19th was a great success. We had 152 attendees who heard from ten pioneers in social enterprise and impact investing in China. A strong view from the attendees was that as long as business can help people at the bottom of the pyramid, or be able to help solve a social and/or environmental issue, that business is having a positive impact. 

We examined the relationships between generating impact and financial return. This Chinese audience was very similar to The Global Impact Investing Network survey: around 66% seeking market rate return; 18% accepting slightly lower return; while the rest only requires capital preservation as long as the investment is generating good impact. 

We also invited two Chinese social enterprise CEOs to discuss their missions and business models, and let the audience vote whether they want to invest in the businesses. I was impressed that the audience started to integrate an impact lens into the investment decision. This is exactly what we had hoped to achieve through the discussion.

Don’t let the perfect be the enemy of the good

Finally, we invited our guests to talk about the roadmap to building an impact investing ecosystem within China. We were happy to see more and more people and organizations getting involved in this sector. For example, The Global Impact Investing Association, established by former China Merchants Bank CEO Ma Weihua in Shenzhen in 2018, aims to lead impact investing in China. Also, Ms. Xu from CreditEase shared the company’s journey in building a microfinance business in China. And finally, Professor John Yang, Co-Dean, BiMBA at National School of Development Peking University, shared the difficulties and challenges of building an impact investing ecosystem in China, and urged more talented people to get involved to help change the environment.

I believe this event is just a start and we need to work together to increase the awareness of impact investing in China. The US has seen huge growth over the past decade, and I believe that can happen in China as well. I also believe that if and when impact investing is “done right”, there is a real opportunity to have a positive effect on both society and planet.

So what comes next?

On April 12-14, there will be a Harvard China Forum in Boston. At this event, we will hold an impact investing panel discussion between the pioneers from both US and China to build more interest. I am also planning to work with HBS professors and The Global Impact Investing Association led by Mr. Ma Weihua on an independent project next semester about how to drive impact investing system in China. 

I am hopeful that these efforts will help to build a bridge between the Impact Investment community in the United States and those within China who are looking to grow this sector.