Interviewee / Zhang Haoling
Co-founder of Heroad Investments (Shenzhen) Venture Capital Co., Ltd. and member of the Social Value Committee
Chairman of Heroad Foundation
Founder of Shenzhen Angel Jujube Health
Host / Mai Zhiyang
NetEase Shenzhen Chief Marketing Officer
Chief editor of NetEase's "Hello, ESG" column
Director of Shenzhen Green Industry Association
Vice Chairman of Inspire Education Empowerment Segment of SHERO Project
Figure 1 Ms. Zhang Haoling being interviewed by NetEase for "Hello, ESG" column
1、The Arrival of the “Good Economy”
Question: How did you know about the concept of ESG investing?
Zhang Haoling: I started to get in touch with ESG-related concepts in 2008, and the real turning point was in 2018. When I was studying at China Global Philanthropy Institute, I was deeply inspired by the good economy concept advocated by Mr. Wang Zhenyao, the founding dean of China Global Philanthropy Institute. Mr. Wang proposed that when GDP per capita reaches US$10,000, social value will lead commercial value and push society into the era of good economy.
When GDP per capita is less than US$10,000, connection between expanding production and fulfilling consumer and societal needs are largely overlapped. After GDP per capita surpasses 10,000 US dollars, consumers have greater demand for more quality services and products . This transformation is also the underlying common ground between the current development of the good economy and ESG. It is worth noting that China’s GDP per capita GDP has exceeded US$10,000 in 2019，and we have witnessed consumers require companies to produce more environmental-friendly products or innovative products that are genuinely helping with our lives.
Question: What is the implication of ESG to investment?
Zhang Haoling: ESG can help us evaluate companies more comprehensively, while guiding us to improve our investment techniques.
Heroad Investments is the first institution in China to establish fund that adopts active ESG investment strategy. Our past investment experience showcases that ESG investment can effectively reduce investment risks while increasing investment returns, and at the same time expand the social value of companies, so that fulfil the idea of investing in goodness will result in good investment.
We have observed that start-up teams that pays more attention to ESG and are willing to create social value tend to have greater innovation capabilities and potential for steady development. These companies have performed well in both economic and ESG indicators. Their comprehensive consideration of economic and ESG practices enables them to demonstrate stronger risk resistance in the face of market changes and challenges.
To illustrate, consider a company's product. In addition to focusing on economic metrics like cost and profit, if we also consider who the product serves, what problems it solves, and what value it provides to society, this ESG mindset can drive innovation, leading to the development of products that better meet societal needs. It can also foster a more positive corporate culture and values, ultimately enhancing corporate governance.
Figure 2 "The Outline of Good Economy" written by Mr. Wang Zhenyao, the founding president of China Global Philanthropy Institute
2、The Creation of "Dual-Track System" that Creates and Share Values with the Invested Companies
Question: How does Heroad Investments implement ESG investment strategies?
Zhang Haoling: At the beginning of its establishment, Heroad Investments created a unique "dual-track" operating model. On the basis of the regular Investment Committee, we also set up the Social Value Committee (SVC).
Before making investment decisions, the Heroad Investments focus on the ESG risk mitigation aspect.The Social Value Committee is responsible for ESG due diligence and has veto power. This supplementary due diligence goes beyond traditional financial and legal review and focuses on an in-depth analysis of the social risks, and potential social value of the project. For any project with significant ESG risks, the committee will exercise its veto power to ensure that investment decisions are consistent with the company's long-term goal of "investing in goodness" and to protect the interests of investors. We did have two projects rejected by the Social Value Committee in the last year due to ESG risks of the projects.
In the post-investment management stage, we transition into the "co-creation" phase of ESG. We believe that every investee company has immense potential for social value creation. Therefore, we require the founders of investee companies to directly participate in the Social Value Committee to jointly explore how to achieve the synergistic growth of commercial value and social value. In addition, we have established a deep cooperation with the China Philanthropy Research Institute of Beijing Normal University to continuously focus on the needs of people's livelihood and social development, provide key information to enterprises, co-create with enterprises, and explore how to serve these needs and better serve society.
Take our invested company T-chef Tech as an example. They were originally committed to improving happiness in the catering industry. In the process of proactively co-creating ESG, we have discovered more possibilities. By considering the environmental aspect, we integrated a food waste shredder function into our intelligent cooking machines, making the product more popular when exported to the European and American markets; by considering the social aspect, we found that smart cooking technology can also improve the quality of vulnerable groups such as the elderly in the community.This proves that social value can lead to the growth of business value. By incorporating ESG thinking into product design, we can not only improve the market competitiveness of our products, but also better meet the needs of the target market, thereby achieving growth in commercial value.
Question: How does the Social Value Committee realize that the recommendations made by the Social Value Committee meet the needs of corporate development?
Zhang Haoling: In the early implementation of ESG investment strategies, we did face some challenges, including how to define ESG investment, what companies can meet ESG standards, and how start-ups can ensure survival and development while meeting ESG standards.
An opportunity to participate in a charity event inspired me. We noticed the needs of the autistic group and began to incubate Shenzhen Angel Jujube Health. It is a project focused on serving the autism community, providing an AI-assisted intervention APP focusing on autism digital treatment. At present, it has cooperated with many medical and rehabilitation institutions.
In the process of business operation and co-creation with the team at "Shenzhen Angel Jujube Health", we have gradually developed a set of ESG investment and ESG practice standard frameworks suitable for start-up companies. This allows us to go beyond the "God's-eye view" of investment institutions and actively participate in business operations to face and solve real problems. Instead of relying solely on theoretical methods, we support the Social Value Committee in providing more practical and feasible consulting and risk alerts to enterprises.
Figure 3 Ms. Zhang Haoling being interviewed by NetEase for "Hello, ESG" column
3、Nurturing Solid Foundations for Companies’ Long-Term Development
Question: As a professional investment institution, how do you view the concerns of some companies that "ESG is a money-consuming thing"?
Zhang Haoling: This concern may stem from companies' past understanding of CSR (Corporate Social Responsibility), such as simple corporate donations. Indeed, such practices create additional expenses for companies and may have some positive brand reputation effects in the long run, but they do not directly affect the overall operations of the company. However, ESG practices are far more than that. They are a strategic self-improvement and optimization process that concerns the long-term value and sustainability of the company. I believe it is a necessary investment for companies.
From a market perspective, we often focus on the numerical market size, but we ignore the driving force behind the market size – why do companies exist in society? The social value of a company determines its necessity for existence and the potential of its market size. ESG practices are an effective way to enhance social value.
ESG practices are currently more common among large listed companies. For these companies, integrating ESG practices does require time and resource investment, but it is a necessary transformation process that requires companies to go through some "growing pains." It is like renovating a large building that has been around for many years. In the short term, it requires investment, but in the long term, these investments will make the building more stable, durable, and adaptable to current social needs, while also reducing future risks.
Moreover, ESG is not just for large companies. On the contrary, we believe that ESG practices are particularly suitable for startups. Integrating ESG principles into corporate planning and design at the early stages of a company's establishment can avoid potential additional costs and prevent potential problems in the future. It is like laying a solid foundation when building a house. Although the obvious effects may not be seen in the early stages, its importance will become increasingly prominent over time.
4、Female Investors as the Emerging Forces in ESG Investment
Question: Do you think is there any unique role for women in promoting ESG practices in the investment field? What are the challenges?
Zhang Haoling: I think women naturally have a very high level of attention and sensitivity to social values and ESG issues. As long as you understand ESG, you will start taking action immediately.
In the past, women did not have a high degree of dominance in the business field, but precisely because we did not have too much experience and fixed thinking patterns, women were more open and inclusive. This allows us to consider more factors in investment decisions, especially ESG-related factors. In addition, statistics show that a higher proportion of women have higher education. These highly educated and outstanding women participate in business activities, injecting new vitality into the investment field and business activities.
Of course, gender itself is not a measure of ability, men and women each have their own unique strengths. More importantly, we emphasize mutual learning and complementarity between both parties, and through team diversification, we jointly build a capable team to better cope with the complex and ever-changing market environment.
The challenge is that women inevitably face fertility issues. In fact, many women show a high sense of responsibility and professionalism in the workplace. Their dedication and enthusiasm for work will not be reduced because of pregnancy, and their abilities and values will not be weakened. But we must also face up to the prejudice against female childbearing in some companies. We women need to start with ourselves and work together to break this prejudice. Some surveys have found that some women choose to conceal their pregnancy or adopt a "nursing style" work style when applying for jobs. This practice not only causes trouble to companies, but also has a negative impact on the overall employment environment of the entire female group. Therefore, we need to work together so that every woman can get the respect and development opportunities she deserves in the workplace.
Figure 4 The picture shows one of the embodiments of corporate culture in Heroad Investments Office - the "Qian Gua" of Yi Jing
Question: Thank you Hao Ling for sharing! At the end of the interview, we specially planned a special event called the "Green Relay Plan", in which each interviewee was encouraged to prepare a special green gift for the next interviewee. This gift is not only a physical representation of the ESG concept, but also carries their love and persistence for sustainable development and public welfare.
Today's green relay comes from Professor Xu Tao, a candidate for the Major National Talent Programs, current director of the Bio-intelligent Manufacturing and Living Printing R&D Center of Research Institute of Tsinghua University in Shenzhen, and chief scientist of Huamei Biotech. Huamei Biotech's product utilizes bioprinting technology to produce medical aesthetic raw materials based on biomimetic principles. It employs cells themselves as "factories" to manufacture materials such as collagen, signaling proteins, and active substances required by humans. By mimicking the natural growth environment of stem cells, a "super cell factory" is created, capable of producing a large quantity of high-performance materials within a small space.
This production method not only effectively improves efficiency and reduces energy consumption, but also reduces carbon emissions. By using cells to produce cells, the pollution to the environment is greatly reduced during the production process, and bionics is used to achieve environmentally friendly production, which is a more sustainable production method.
Zhang Haoling: One of my green relays comes from "The Outline of Good Economy" written by Mr. Wang Zhenyao, dean and founding president of the China Philanthropy Research Institute of Beijing Normal University and chairman of the Heroad Investments’ Social Value Committee. This book serves as an action guide for achieving mutual benefit in a benevolent economy era. It delves into the essence, characteristics, social structure, challenges, and development trends of the good economy. The other gift comes from the charitable funds that we have been supporting to achieve employment for young people with intellectual disabilities by inheriting intangible cultural heritage techniques. This classical embroidery tea party is the work of young people with mental disabilities.
Figure 5 Classical embroidered tea banquet
Figure 6 Ms. Zhang Haoling of Heroad Investments and the column editor of "Hello, ESG". Mai Zhiyang took a photo for this episode of "Green Relay Plan"
About Heroad Investments
Heroad Investments was founded by a group of experienced angel investors, financial and public policy leaders, senior executives of the top tiered VCs and Fortune 500 companies. The core team has been working together for more than 10 years, and co-founded QF Capital and Grandway Capital with an accumulative AUM of over RMB 10 billion.
About Hello, ESG
To thoroughly explore and disseminate these outstanding practical cases, NetEase Shenzhen has launched the column "Hello, ESG - 100 ESG Practices and Reflections." Through these cases, NetEase hope to share the experiences and achievements of practitioners from different industries in ESG practices, inspiring more companies to conduct ESG actions.
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