A new ESG star is born - China Baoli enters crowded ESG field to attract ESG funds

On 23 Sep 2021, China Baoli Technologies Holdings Limited (SEHK:164) ("China Baoli") announced that it has formed a joint venture with HuaYing Mining Technology Limited and Top Skill Global Limited. The formation of the JV implies that China Baoli has acquired a new mining technology - the DGDS Technologies which can be applied to water-deficient areas in processing ultra-lean magnetite ore arena.

In the entire beneficiation process of the DGDS Technologies, water will not be consumed as a medium in mining process, and hence, this resolved the problem of water pollution as a result of the release of toxic substances when using the traditional wet separation mining technology. The move marked a significant step for China Baoli to transform itself into an environmental friendly company.

There has been a marked increase in awareness of ESG amongst investors for many reasons. Investors believe that EGS improves company financials and the companies always offer better return. ESG funds in Australia raked in US$1.17 billion in new money during the quarter ended in September 2021, according to the latest Fund Flow Index from Calastone. The funds have registered their biggest ever inflows during the third quarter of 2021, surpassing the combined flows of every quarter since 2019.

In China, the first carbon-neutrality themed bond fund was introduced as the country continues its drive to fund President Xi Jinping's pledge to be carbon neutral by 2060, China Fund News reports. The fund raised US$389 million in initial assets in just a month.

Apart from investors' interest, supportive government initiatives act as another catalyst for China Baoli's stock price to grow. The PRC has tightened the production control on iron ores mining since July 2021. Recently, the Ministry of Ecology and Environment issued a draft guideline that it planned to involve steel mills which located in 64 regions in the PRC to cut production based on the emission levels from Oct 2021 until Mar 2022. China Baoli's new technology can greatly improve the total iron content in concentrates while also help the market players to meet the environmental parameters set by the PRC to curb pollution.

On 10 Oct 2021, China Baoli, the Liaoyang Gongchangling District Government, Angan Steel Co Ltd (SEHK: 374) have entered into a partnership to develop the "Baoying 5 Million Tons New Environmentally Friendly Beneficiation Production Project". It has strengthened China Baoli's leading position and highlighted that it has gained the government recognition as an ESG-friendly company.

Whether the prices of ESG stocks perform better than the others remains debatable, ESG ETFs has been performing very well. Sustainable equity funds have outperformed traditional peers in 2020 and three out of four sustainable equity funds beat their Morningstar Category average. While investors keep pouring money into ESG funds and thus flooding into ESG companies, stock price of China Baoli is set to soar.