State Street Global Advisors (SSGA) has teamed up with E Fund Management (E Fund) to co-develop a new environmental China A share strategy.

The company's spokesperson told Citywire Asia that the new State Street – E Fund Environmental Driven China A strategy is a research methodology that seek to identify environmental leaders in the China A share market through rules-based methodology.

The strategy designed to help investors effectively integrate environmental scoring into their Chinese equity portfolios.

'We are in discussions with a number of institutional investors who are interested in this strategy,' SSGA's spokesperson said.

Among the institutional investors who have shown interest in this strategy include the sovereign wealth funds and central banks, as well as the global private banks.

Sau Kwan, president at E Fund, said the idea of environmental investing has recently raised a strong awareness and support from both government authorities and leading corporations in China.

With increased interest in ESG from Chinese investors, E Fund is keen to continue its fulfilment on ESG principles as a responsible asset manager.

SSGA and E Fund share the same desire to incorporate ESG principles in their investment approaches. They are both signatories to the United Nations Principles for Responsible Investment.

SSGA and E Fund have been supporting their clients to increasingly integrate sustainable and responsible investing in their portfolios.

In January 2017, E Fund Management and SSGA signed a memorandum of understanding to jointly explore strategic opportunities across global markets, including China’s fast-growing fund management industry.

'We have been working collaboratively on a number of initiatives. This is the first one we are bringing to the market,' SSGA's spokesperson said.

James MacNevin, head of Asia Pacific at SSGA, said the company is excited about its collaboration with E Fund.

‘We believe our more than 30 years of experience in ESG investing, combined with E Fund’s local expertise, will facilitate the development of sustainable investments in the China market,’ he said, adding that SSGA launched its first active ESG strategy in 1985.

The new environmental China A share strategy incorporates a bottom-up construction approach.

It combines sustainability metrics from a number of data providers with focus on companies which are more carbon-efficient, generate higher green revenues, and have better environmental policies.

SSGA’s bond index fund

Separately, SSGA has also announced that its ABF Pan-Asia Bond Index fund (PAIF) has launched a securities lending program.

Effective from July 10, certain Asian local-currency-denominated bonds held by PAIF will be available to qualified borrowers in the securities lending markets.

PAIF primarily invests in local currency government and quasi-government bonds in Asia.

It is a component of the Asian Bond Fund (ABF), the EMEAP1 (Executives' Meeting of East-Asia and Pacific Central Banks) Group's initiative to further develop the bond markets in Asia.

Since the inception of the ABF in 2003 until 2017, the amount of local currency-denominated bonds in Asia recorded a nearly eight-fold increase from around $1.3 trillion to more than $10 trillion.

PAIF is the first fund among EMEAP’s ABF series to launch a securities lending program.