Socially responsible investment (SRI) has the potential to grow rapidly in China, according to a report from finance giant UBS. Despite the concept of social enterprise sill being nascent in the country, the younger generation is driving growth in the sector.
The UBS report says that incidents such as the Guo Mei Mei scandal have left Chinese citizens sensitive and suspicious – and some even resistant – to the collaboration between charity and business.
The Guo Mei Mei scandal followed the uncovering of a complex relationship between China Red Cross Bo’ai Asset Management and the Red Cross Society of China. Partly as a result of these scandals, SRI has not grown at the same rate in China as it has in Europe and America.
However, in recent years the study found that there has been a rapid growth in the establishment of specialised social venture capital funds. Case studies on impact investment have also proven the feasibility of such funds.
Globalisation has also been credited with raising awareness of impact investment in China. The report points out that the population is now more aware of global issues and trends and information spreads fast. Therefore, developments in social enterprise around the world are starting to affect China “in real time”.
The younger generation is now driving social investment in China, according to Ding Kaijie of the Compilation and Translation Bureau within the Communist party central committee.
He said, “The young generation in the non-profit sector has great enthusiasm for social enterprise. Their education backgrounds and professional experiences lead them to believe that there must be innovative means to address social issues, and that traditional philanthropic models have no achieved ideal results in China.”
Currently, the most common types of social enterprises in China focus on employment of disabled persons, poverty alleviation and the care of the elderly. In contrast, case studies of successful environmental protection projects are rare.
Yan Lau, head of family services at UBS, said, “We believe that financial services organisations have a responsibility to promote social innovation, help address pressing social issues and provide finance-related services for socially innovative organisations and projects.
“Moreover, we believe that in the future, China will become a leader in the area of social innovation and social enterprises.”
The report concluded that China’s rapid economic development in the last 30 years had led to economic inequality and environmental damage, and that impact investment could provide a new method for addressing this.