Hillhouse Capital Integrates ESG Concepts into its Practice

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The ESG Global Leaders Conference was held from September 13th to 15th at the Greenland Bund Centre in Huangpu District, Shanghai, focusing on “Sustainable Economic Growth, Social Development, and Environmental Protection.”

During a forum on the 13th, Li Liang, founding partner of Hillhouse Capital, stated that the firm has always been familiar with ESG concepts. Long before ESG became a “buzzword”, many of its principles were already integrated into the company’s operations and growth strategies.

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Li Liang explained that from its inception, Hillhouse has been a proponent of long-term value investment. They established an internal “ESG Special Committee” to promote ESG culture to employees, investee companies, and other stakeholders. The firm also joined the United Nations Principles for Responsible Investment, working with over 3,600 global institutions to champion ESG investment philosophies, thereby propelling the continuous healthy development of green investment.

“Having been involved in investing in industrial goods, manufacturing, and the energy sector for over a decade, I have a deep understanding of industries with high carbon footprints that are challenging to decarbonize,” said Li Liang. A few years ago, Hillhouse released its pioneering “Carbon Neutral” proposal to its investee companies and partners. This move aimed to gradually encourage these companies to take scientific carbon-reducing measures, fostering their green growth and low-carbon transition.

Speaking of Hillhouse’s ESG investments and post-investment practices, Li Liang said the firm believes technological innovation is the fundamental solution for addressing ESG and transitioning to a low-carbon future. With VC and PE playing significant roles in this transition, exciting developments have emerged over the past decade. “Driven by entrepreneurs’ technological innovation and the push from VC/PE institutions, the cost of photovoltaic power generation has decreased by over 90%, and wind power costs have dropped by more than 50%.”

Li Liang stressed that Hillhouse has always prioritized new energy, new materials, and the development and industrial application of leading technologies in these fields. “This year, we invested in a company dedicated to the large-scale, low-cost production of green hydrogen. With its core technology, it can efficiently utilize methane to produce hydrogen gas and high-value-added carbon products, all in a zero-emission process. This company has scaled its application in several sectors, notably providing green hydrogen and methanol solutions for LNG marine transport,” he revealed.

“Global innovation companies with such advanced technologies can both accelerate energy technology innovation worldwide and stimulate global industrial chain integration. They align well with ESG sustainable development principles, and this is one of Hillhouse’s primary focuses,” emphasized Li Liang.

Furthermore, Li Liang views ESG as a guideline for investment behavior, incorporated throughout the full investment cycle, from pre-investment due diligence and decision-making during the investment to post-investment empowerment.

Hillhouse is actively leveraging its influence on its investment portfolio. “If ‘sustainability’ in the investment industry means ‘cyclical resilience,’ then our approach to achieving it is to collaborate with investee entrepreneurs from a long-term perspective. We jointly seek to enhance intrinsic motivation and increase resilience. This is our pursuit of sustainability,” Li Liang concluded.

Article by Mingmin Zhang, Equal Ocean.

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