中国公募基金发展与现状黄莉 王旻玥，CFA13 December 202211中国公募基金概况22中国货币基金概况103货币基金法规的发展和比较194ESG基金24Contents中国公募基金概况13.
2023-01-13
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Shanghai Guidebook for Overseas Asset Manager Supervised by Shanghai MunicipalFinancial Regulatory BureauAsset Management Association of ChinaShanghai Securities Regulatory BureauCompiled byShanghai Asset Management AssociationShanghai Asset Management AssociationShanghai Guidebook for Overseas Asset Manager 2022Building Consensus and Working Together for a New Chapter in the High-Standard Opening-Up of the Fund IndustryOver the course of its 31-year history,from the establishment of the Shanghai and Shenzhen stock exchanges to the birth of the Beijing Stock Exchange,Chinas capital market has been keeping pace with Chinas reform and open-up.Its fund industry is no different.Facing a worldwide pandemic and a complex global situation,Chinas fund industry has domonstrated strong resilience and potential with an open mind to international cooperation,an inclusive approach to growth challenges,and a high standard for a new chapter in opening-up.The opening-up of Chinas capital market and fund industry requires the implementation of both the“going global”strategy and the“bringing in”strategy.As opening-up measures set out in various policies are put into effect,Chinas goals to open its capital market and improve its multi-tiered market system and structure have become clearer.Learning from the asset management experience and practices in ForewordShanghai Guidebook for Overseas Asset Manager 2022overseas markets and fostering a diverse range of market entities are an important way toward a more robust market economy and national governance system.We firmly believe that opening-up means not only more open policies for both domestic and overseas parties,but also a process by which they build mutual understanding,wider consensus,and mutual trust.Therefore,strengthening dialogue with all stakeholders has been a major objective for Chinas fund industry.We understand that it is inevitable that different jurisdictions,for their unique political,economic,cultural,and historical background and legal traditions,also differ in their legal and regulatory systems.Accordingly,we are dedicated to international engagement to better understand the unique systems and position of each countrys fund industry,and to inform them of the structure,legal framework,history,and achievements of Chinas fund industry,in order to build consensus and mutual trust to promote the joint,healthy,harmonious,and high-quality development of the international fund industry.Shanghai is one of the regions at the very forefront of Chinas reform and opening-up;its achievements have been numerous and exciting.Globally,it is becoming one of the cities with the highest concentration of global financial institutions,a most complete financial market,and a most friendly business environment.According to the 14th Five-Year Plan for the Building of Shanghai International Financial Center,by 2025,Shanghai will establish a world-class financial ecosystem by building“two centers,two hubs,and two magnets,”i.e.,enhancing its status as a global asset management center and fintech center;establishing and consolidating its position as an international green finance hub and a hub for the cross-border use of RMB;and building and highlighting its role as a magnet for international financial professionals and for financial institutions.In May 2021,the General Office of Shanghai Municipal Peoples Government issued the Opinions on Accelerating Building Shanghai into a Global Asset Management Center,which states that Shanghai will become an integrated and open asset management market with a high concentration of industry resources,a high level of international engagement,and a mostly complete ecosystem,a key hub for asset management in Aisa,and one of the leading asset management centers in the world in five years.As one of the most open cities in China,Shanghai prides itself on its pro-market practices,law-based business environment,and a high concentration of domestic and foreign-invested financial institutions and financial talent.It has made pioneering and milestone progress in investment and trade facilitation and liberalization,as well as in financial opening-up and innovation.Shanghai is also one of the birthplaces of the Chinese fund industry.It has witnessed just about every significant moment of the industry,including the creation of the first fund companies in China,the first wave of Sino-foreign joint venture fund management companies,the first closed-end,open-end,index,money market,and Qualified Domestic Institutional Investor(“QDII”)funds,the first wholly foreign-owned public fund manager,and the first wholly foreign-owned private securities fund manager(“WFOE PFM”).Shanghai todaywith its institutional innovations,ever-more friendly foreign investment policies,and expanding range of financial servicesis demonstrating its determination to achieve greater financial openness and innovation and to build itself into a global asset management center and fintech center.We cordially welcome overseas asset management firms to do business in China and in Shanghai in particular,and to build synergy with domestic asset management firms,so as to provide Chinese investors with a richer selection of asset management services and,at the same time,to enjoy a share of the opportunities from Chinas economic growth.Table of ContentsWhy China1.Important Role of China in the Global Economy2.Huge Prospects of Wealth Management Market3.A More Open Financial Market4.Complete RMB Price Benchmark SystemChapter 1 Why Shanghai1.Shanghai Overview 2.Complete Financial Market Framework3.An Open Shanghai4.Excellent Business Environment 5.Full Range of Financial Institutions 6.Innovations in Financial Reform7.Cutting-Edge Fintech8.A Deep Talent PoolChapter 3 131212111110101010Overview of Fund Management Services in China1.Public Fund Management 2.Private Asset Management Business of Securities and Futures Institutions3.Private Fund ManagementChapter 2 09 0807070202050101Shanghai Guidebook for Overseas Asset Manager 2022Overview of the Fund Management Industry in Shanghai1.Public Fund Management Industry2.Private Fund Management Industry 3.International Asset Management Firms4.Shanghai Asset Management Association(SAMA)Chapter 4 Fund Types and Legal Framework1.Public Funds2.Private Asset Management Business of Securities and Futures Institutions3.Private Funds Chapter 6 23222121Laws,Regulations,and Regulatory Policies1.Public Funds 2.Private Asset Management Business of Securities and Futures Institutions3.Private Funds Chapter 5 191918181716151414404140404040Fund Service Providers1.Fund Operation Service Providers2.Securities and Futures Brokers3.IT System Service Providers4.Accounting Firms and Law Firms5.Benchmark Data ProvidersChapter 8Tax Policies on Funds1.CIT2.VAT3.Other Taxes4.Requirements for Compliance with the Common Reporting StandardChapter 104747464545Chapter 73632302525Application and Approval of Products and Institutions1.Public Funds 2.Private Asset Management Products of Securities and Futures Institutions3.Private Funds4.Cross-Border Investment Pilot SchemesChapter 9434242Fund Offering1.Public Fund Offerings2.Private Fund OfferingsShanghai Guidebook for Overseas Asset Manager 2022Other Helpful Information on Doing Business in China1.Company Establishment2.Working in China as Overseas Individuals(including those from Hong Kong SAR,Macau SAR,and Taiwan Region)3.Taxes Chapter 1150505052Relevant Government Authorities,Institutions and Other Organizations1.Financial Regulatory Authorities2.Self-Regulatory Organizations and Service InstitutionsChapter 12545458Afterword6768DisclaimerAppendix59Opinions on Accelerating the Development of Shanghai as a Global Asset Management Center01|Why ChinaChapter 1 Why China1.Important Role of China in the Global EconomyChina has consistently been the top contributor to world economic growth since 2006.Between 2013 and 2021,China averaged an annual growth rate of 6.5%,significantly higher than the world average of 2.9uring the same period.Since overtaking Japan to become the worlds second-largest economy in 2010,China has maintained the second position in the world by gross domestic product(GDP)and is accounting for an increasing proportion of the world economy.According to the International Monetary Fund(IMF),Chinas GDP in 2021 was USD 17.7 trillion,representing 18.5%of the worlds total,a 7.1 percentage point increase over 2012.According to the World Investment Report 2022 released by the United Nations Conference on Trade and Development,China has become one of the worlds most appealing economies.In 2021,foreign direct investment(FDI)in developing countries in Asia rose 19%year-on-year,and capital inflow to China,the main destination of FDI,increased 21.5%year-on-year to USD 181 billion1.1 Source:World Investment Report 2022 2 Source:National Bureau of Statistics3 Source:2021 China Private Wealth Report jointly released by China Merchants Bank and Bain&Company2.Huge Prospects of Wealth Management MarketFrom 1952 to 2021,China saw a surge in GDP from RMB 67.91 billion to RMB 114.1 trillion,accounting for more than 18%of the world economy,and a growth in GDP per capita from RMB 119 to RMB 81,000,indicating a rapid rise in the residents wealth2.In Table 1:Foreign Direct Investment in ChinaYearChinas GDP as Percentage of Global TotalFDI Ranking201916.7%2nd in the world2020202117.4.5%2nd in the world2nd in the world2020,China had 2.62 million high-net-worth individuals whose personal investable assets exceeded RMB 10 million,giving a compound annual growth rate(CAGR)of 15tween 2018 and 20203.Together,these individuals held RMB 84 trillion of investable assets,Shanghai Guidebook for Overseas Asset Manager 2022 Why China|02 4 Source:Future of Wealth Management Industry Trends and Prospects in China and Beyond,KPMG5 Source:World Investment Report 2022 6 Source:Asset Management Statistics(Fourth Quarter,2021),AMAC 7 Source:Boston Consulting Group 8 Source:Society for Worldwide Interbank Financial Telecommunication(SWIFT)9 Source:IMF report 10 Source:SWIFT statisticsAs the international community increasingly recognizes China s efforts on legalization,marketization and internationalization in the capital market,China A shares and bonds are being included into mainstream international indices with continuously increasing weights.MSCI has announced that,from March 2019 to November 2019,the inclusion factor of all China large-cap A shares in the index would be increased from 5%to 20%,and China mid-cap A shares(including eligible Growth Enterprise Market stocks)would be included in the MSCI index with a 20%inclusion factor.From April 1,2019,RMB-denominated Chinese treasury bonds and policy bank bonds have been included in the Bloomberg Barclays Global Aggregate Index.Full inclusion was achieved in November 2020 at a weight of 6.3%.Indeed,RMB has emerged as the fourth-largest denomination currencyafter USD,EUR,and JPYfor bonds.In September 2019,FTSE Russell raised the inclusion factor for A shares from 5%to 15%.In September 2019,S&P Dow Jones officially added 1,099 China A shares into its S&P Emerging BMI with an inclusion factor of 25%.On February 28,2020,J.P.Morgan Chase&Co.3.1.2 Integration of Chinas Capital Market into the Global Indexor about RMB 32.09 million per person in 2020.Nationwide personal investable assets reached RMB 241 trillion,recording a CAGR of 13tween 2018 and 2020.KMPG estimates that from 2021,the total investable assets of Chinese residents will grow at 10ch year to hit USD 50 trillion by 20254.With the changing socioeconomic structure and residents increasing awareness of wealth management,a substantial increase is expected in the proportion of publicly offered funds(“public funds”)and privately offered funds(“private funds”).The capital market products held by Mainland residentsstocks,bonds,public funds,and private fundshave been growing at a markedly faster pace in recent years.Their CAGR reached around 27tween 2018 and 2020,much higher than that of individuals total investable assets over the same period5.By the end of the fourth quarter of 2021,the assets under management(AUM)of Chinas asset management industry amounted to RMB 67.87 trillion,up 15.1%6.year-on-year.The Boston Consulting Group predicts that the industry would grow at a yearly average of 15tween 2018 and 2025,significantly higher than the average of 6%for the rest of the world7.3.A More Open Financial Market3.1 RMB Internationalization and the Integration of Chinas Capital Market into Global IndicesAs the official entry of RMB into the special drawing rights(SDR)currency basket greatly facilitated the cross-border use of RMB,the total amount of cross-border RMB receipts and payments is increasing rapidly.At the end of 2021,RMB overtook JPY as the fourth-largest payment currency in the world8.As of the fourth quarter of 2021,the proportion of RMB assets held by the worlds foreign reserve administrators had reached 2.79%,the highest level since IMF began to report RMB reserve assets in 3.1.1 RMB Internationalization2016.This puts RMB reserve assets in the fifth place globally9.As of December 2021,RMB has taken a 2.7%share in international payments10.In early 2021,six government ministries and commissions in China,including the Peoples Bank of China(PBOC),jointly issued the Notice on Further Optimizing the Cross-Border RMB Policy to Support the Stability of Foreign Trade and Foreign Investment(Yinfa 2020 No.330).This Notice aims to streamline the cross-border RMB settlement process and enhance the administration of cross-border RMB investment and financing,and has further relaxed the requirements on payment and receipt under capital accounts.officially included Chinese treasury bonds into its benchmark emerging-market indices.Starting from October 29,2021,Chinese treasury bonds have become part of the FTSE World Government Bond Index(WGBI);full inclusion is to be completed over a 36-month schedule.Current weight is around 6%.With this,Chinese treasury bonds have become part of three major global bond indices.3.2 Opening up of the Capital MarketAs the demand for Chinese assets keeps rising,China has established numerous mechanisms to make its capital market more accessible to foreign investors.In 2003,China established the Qualified Foreign Institutional Investor(“QFII”)scheme to make its capital market accessible to foreign institutional investors.In December 2011,the RMB Qualified Foreign Institutional Investor(RQFII)scheme was introduced on a pilot basis to permit investment of offshore RMB in the Mainland.In September 2019,the State Administration of Foreign Exchange(“SAFE”)removed the investment quota for QFII and RQFII.On September 25,2020,CSRC,PBOC,and SAFE released the Administrative Measures for Domestic Securities and Futures Investment by Qualified Foreign Institutional Investors and RMB Qualified Foreign Institutional Investors.At the same time,CSRC issued supporting rules for its implementationthe Provisions on Issues Related to the Implementation of the Administrative Measures for Domestic Securities and Futures Investment by Qualified Foreign Institutional Investors and RMB Qualified Foreign Institutional Investorswhich has greatly facilitated foreign investment in the Mainland by further lowering the barrier to entry and expanding the scope of 3.2.1 QFII and RQFIIpermissible investments.As of the end of September 2022,723 foreign institutional investors have gained access to Chinas capital market11.From September 2,2022,QFIIs and RQFIIs have been allowed to participate in the trading of some futures and option contracts listed on the four futures exchanges of China(i.e.,China Financial Futures Exchange,Zhengzhou Commodity Futures Exchange,Shanghai Futures Exchange,and Dalian Commodity Futures Exchange)12.03|Why China11 Source:China Securities Regulatory Commission 12 Source:China Securities Regulatory Commission 13 Source:Tsinghua PBCSF Global Finance Forum 14 Source:2021 market statistics released by HKExOn November 17,2014,the Shanghai-Hong Kong Stock Connect was officially launched.On December 5,2016,the Shenzhen-Hong Kong Stock Connect was officially launched.With increasingly strengthened connections between the securities infrastructure in the Chinese Mainland and Hong Kong SAR,the turnovers of the Shanghai-Hong Kong Stock Connect and the Shenzhen-Hong Kong Stock Connect are increasing month over month.As of the end of October 2021,total turnover of northbound trading under Shanghai-Hong Kong Stock Connect and Shenzhen-Hong Kong Stock Connect was RMB 63.14 trillion with a net inflow of RMB 1.53 trillion;total turnover of southbound trading under the two schemes was HKD 22.93 trillion,with a cumulative net flow of HKD 2.14 trillion into Hong Kong13.In 2021,total turnover of northbound trading under the two schemes was RMB 27.6 trillion,up 31%year-on-year;the figure in the other direction rose 70%year-on-year to HKD 9.3 trillion14.3.2.2.Stock Connect:Shanghai-Hong Kong and Shenzhen-Hong KongIn August 2010,the PBOC issued the Notice on Issues Concerning the Pilot Program on Investment in the Interbank Bond Market with RMB Funds by Three Types of Institutions 3.2.3.Opening up of the Interbank Bond Market:CIBM Direct and Bond ConnectShanghai Guidebook for Overseas Asset Manager 2022Why China|04 Including Overseas RMB Settlement Banks,thereby permitting overseas central banks and monetary authorities,RMB settlement banks in Hong Kong and Macao,and overseas banks offering RMB settlement services for cross-border trades to enter Chinas interbank bond market under the settlement agent model.This marks the official opening up of Chinas interbank bond market.In February 2016,the PBOC released Announcement 2016 No.3(“Matters Concerning Investment in the Interbank Bond Market by Overseas Institutional Investors”),allowing overseas financial institutions and their financial products to invest in the interbank bond market under the settlement agent mode.This access model is referred to as CIBM Direct and heralds the full opening-up of the interbank bond market.On July 2,2017,the PBOC and the Hong Kong Monetary Authority jointly announced the approval of the Bond Connect scheme between Hong Kong and the Mainland.In July 2020,the PBOC and the CSRC jointly released an announcement,approving the connectivity of infrastructures between the interbank bond market and the stock exchange bond market.On May 27,2022,the PBOC,CSRC,and SAFE jointly published the Announcement on Matters Concerning Further Facilitating the Investments of Overseas Institutional Investors in Chinas Bond Market(2022 No.4),which makes coordinated arrangements for promoting the opening-up of both the interbank bond market and the stock exchange bond market,centralizes the management of market access and cross-border capital flows for overseas institutional investors,and encourages overseas institutional investors with approved access to the interbank bond market to invest in the stock exchange bond market directly or through stock connectivity schemes.According to the PBOC Shanghai Head Office,as of the end of June 2022,overseas institutions held RMB 3.57 trillion of bonds in the interbank market,of which 92.2%or RMB 3.29 trillion were under the custody of China Central Depository&Clearing Co.,In 2015,the scheme for Mainland-Hong Kong mutual recognition of funds was launched.By the end of Q1 of 2022,38 funds in the Mainland and 47 funds in Hong Kong had been registered under the scheme.In April 2019,the China-Japan ETF Connect was launched.Currently,there are 4 ETFs listed on Shanghai Stock Exchange,1 ETF on Shenzhen Stock Exchange,and 6 ETFs on Tokyo Stock Exchange.In 2020,four ETF products were simultaneously listed on the Hong Kong Exchanges and Clearing Limited(HKEx)and the Shenzhen Stock Exchange(SZSE).In June 2021,one ETF product from Shanghai and another from Hong Kong were listed on HKEx and SSE simultaneously.In May 2021,SSE entered into a memorandum of understanding with the Korea Exchange to facilitate discussions on a possible China-Korea ETF Connect.In a joint announcement in June 2022,CSRC and the Securities and Futures Commission(SFC)of Hong Kong approved the inclusion of eligible ETFs in the Mainland-Hong Kong stock connect schemes.On July 4,2022,trading of ETFs under the Mainland-Hong Kong stock connect schemes was officially launched.The first wave consisted of 87 ETFs15.3.2.4.Two-Way Opening-up of Public FundsChina has lifted foreign ownership cap for fund management companies as of April 1,2020.In June 2021,CSRC granted a license to BlackRock Fund Management,Co.Ltd.,marking the establishment of Chinas first wholly foreign-owned public fund management company.In September,BlackRock 3.3.1 Public Fund Management Companies3.3 Opening up Policies for Institutions15 Source:CHINAFUNDLtd.(“CCDC”).CCDCs data show that,as of the end of June 2022,CIBM Direct accounted for RMB 2.62 trillion or 79.6%of the bonds held by overseas institutions.in 2002 33%in 200549%in 2018510%April 1,202005|Why ChinaThanks to Chinas increasingly accessible financial market and loosening control on foreign exchange under capital accounts,foreign capital now has much greater flexibility in choosing where and how to invest in Chinas equity market.In January 2011,Shanghai officially issued the Implementing Measures for the Pilot Program of Foreign-invested Equity Investment Enterprises in Shanghai,marking the launch of the QFLP(Qualified Foreign Limited Partnership)pilot scheme in the Mainland.This scheme offers a“fast track”for pilot foreign private equities(PEs)to invest in domestic enterprises.Beijing,Tianjin,Chongqing,Shenzhen,Suzhou,Hainan,and Qingdao have since launched their own version of the scheme.3.3.3 Private Equity Fund Managers4.Complete RMB Price Benchmark SystemAs an important indicator of monetary and fiscal policies,and one of important financial risk parameters,Chinese treasury bond yield curves compiled by CCDC is widely used by the Ministry of Finance(MOF),the PBOC,the China Banking and Insurance Regulatory Commission(CBIRC),and other government departments,and displayed on their offcial website.The three-month ChinaBond government bond(CGB)yield is used by the IMF as a representative RMB interest rate to calculate the SDR interest rate.CCDC publishes more than 3,500 yield curves of various type,including government bond yield curves on a daily basis.This complete suite of yield curves accurately reflects the price and risk changes in the bond market and provides a pricing reference for more than RMB 145 trillion of financial assets.CGB yield curves are used by nearly 1,500 domestic and foreign institutions for pricing analysis and risk monitoring.4.1 Chinese Treasury Bond Yield CurvesFund Management launched its first public fund,raising about RMB 6.881 billion from more than 111,000 subscribers.In August 2021,Fidelity International received an approval from CSRC to establish FIL Fund Management(China)Co.,Ltd.Neuberger Berman Fund Management(China)Co.,Ltd.was approved in September 2021 and has recently announced the receipt of a public fund license.Other major names in the asset management industry,such as Schroders,AllianceBernstein,and VanEck,have also applied for the establishment of a wholly foreign-owned fund manager.Figure 1:Progression of Foreign Ownership Cap for Fund CompaniesOn June 30,2016 at CSRCs approval,the Asset Management Association of China(“AMAC”)released the Responses to Questions regarding Registration and Filing of Private Funds(No.10),allowing foreign-invested financial institutions to set up wholly foreign-owned private securities fund managers(“WFOE PFMs”)in China.In February 2019,the first wave of qualified foreign-invested private fund managers(PFMs)were approved to offer investment advisory services.In February 2019,qualified foreign-invested PFMs were granted access to the interbank bond market.In June 2019,restrictions on foreign-invested private funds participation in the Hong Kong Stock Connect were removed.3.3.2 Private Securities Fund ManagersShanghai Guidebook for Overseas Asset Manager 2022ChinaBond New Composite Index,ChinaBond Treasury Bond Aggregate Index,ChinaBond Finance Bond Aggregate Index,and ChinaBond Credit Bond Index are the major benchmark indices-reflecting the overall trend and yield of the RMB bond market,which are provided by CCDC(https:/ has the most comprehensive RMB bond index series,which consists of more than 1,400 indices from more than 10 index families,including aggregate indices,theme 4.2 Benchmark Indices in Chinas Bond Marketindices,green bond indices,and more.ChinaBond indices are listed on Singapore Exchange Limited(SGX),Luxembourg Stock Exchange(LuxSE),and ChongWa(Macao)Financial Asset Exchange(MOX);ETF products tracking ChinaBond indices are listed on the Taiwan Stock Exchange(TWSE),New York Stock Exchange(NYSE),and SGX.The ChinaBond index information is available globally through domestic and foreign information providers,providing a representative investment benchmark and an effective tracking target for overseas investors with exposure to the Chinese bond market.Why China|06 Chapter 2 Overview of Fund Management Services in ChinaBy the end of the fourth quarter of 2021,the total AUM of public fund management companies and their subsidiaries,securities companies,futures companies,and PFMs was approximately RMB 67.87 trillion16,comprising RMB 25.56 trillion of public funds managed by public fund companies,RMB 8.24 trillion of private funds managed by securities companies and their subsidiaries,RMB 7.39 trillion of private funds managed by fund companies and their subsidiaries,RMB 3.96 trillion of pension funds managed by fund companies,RMB 354.9 billion of private funds managed by futures companies and their subsidiaries,RMB 20.27 trillion of private funds managed by PFMs(consisting of RMB 6.31 trillion of private securities funds,RMB 13.14 trillion of private equity and venture capital funds,RMB 4.815 billion of private asset allocation funds,and RMB 814.012 billion of other types of private investment funds),and RMB 2.25 trillion of special asset-backed schemes.At the end of December 2021,there were 151 public fund management firms,consisting of 137 fund management companies(including 45 foreign-funded firms and 92 domestic-funded firms),12 securities companies or asset management subsidiaries of securities companies with a public fund license,and 2 insurance companies with a public fund license.These public fund management firms managed 9152 fund products of various types17.Since 2012,the AUM of public funds has achieved high growth for 10 consecutive years,reaching RMB 25.56 trillion by the end of 202118.1.1 Rapid Growth of AUM1.Public Fund ManagementFigure 2:AUM Growth of Public Funds in Past 10 Years2012201320142015201620172018201920202021AUM（th）YoY Change（）2.873.004.548.409.1611.6013.0314.7719.8925.564.53Q.33.02%9.05&.64.33.354.66(.51 Source:Asset Management Statistics(Fourth Quarter,2021),AMAC17 Source:China Securities Regulatory Commission 18 Source:AMAC07|Overview of Fund Management Services in ChinaShanghai Guidebook for Overseas Asset Manager 2022At the end of 2021,China became the worlds fourth largest open-end fund market at an AUM of USD 3.53 trillion,or 4.97%of the worlds total.AUM of public funds worldwide,ranking first in Asia19.1.2 Public Fund AUM Ranking Fourth Globally and First in Asia19 Source:Worldwide Regulated Open-end Fund Data,Investment Company Institute(ICI)20 2022 China Securities Investment Fund Fact Book21 Source:AMAC 22 Source:Asset Management Statistics(Fourth Quarter,2021),AMACBy the end of 2021,there were 1,423 million active fund accounts20.1.3 Over 1,400 Million Fund Investment Accounts1.4 Pivotal Role of Public Fund Management Companies with Foreign CapitalBy the end of the fourth quarter of 2021,the total AUM of securities and futures institutions through private asset management services was RMB 15.99 trillion22.2.Private Asset Management Business of Securities and Futures InstitutionsThe asset management industry has always been at the forefront of the opening up of Chinas financial markets.The Sino-foreign equity joint venture public fund management companies have operated in China for 19 years,since the inception of the first joint venture public fund management company in 2002.They have been playing a pivotal role in the public fund development in China.As of the end of August 2021,44 out of the 151 companies with public fund license in China had a combined AUM of RMB 11.39 trillion,or 47.4%of the total21.Table 2:AUM of Private Asset Management Business of Various Institutions17,8727,2934,1341,7248.245.072.320.36End of the Fourth quarter of 2021Number of ProductsAUM(tn)Asset management products of securities companiesAsset management products of fund companiesAsset management products of subsidiaries of fund companiesAsset management products of futures companiesOverview of Fund Management Services in China|08 23 Source:Speech by Fang Xinghai,Vice Chairman of CSRC,at the 2022 China Wealth Forum24 Source:Monthly Report on Registration of Private Fund Managers and Filing of Private Fund Products(Issue 12,2021)25 Source:Securities TimesAt the end of the fourth quarter of 2022,there were 24,610 PFMs registered with AMAC,managing 124,098 private funds with a total AUM of RMB 20.27 trillio22.This makes China second only to the United States in both the number and AUM of private funds23.As of December 2021,Shanghai,Shenzhen,and Beijing were the top three places of registration for PFMsat 4,531,4,308,and 4,296 managers respectively together representing 53.4%of the total number in China.Managers in those three cities were overseeing 35,323,19,783,and 19,689 products,amounting to 60.3%of the national total;the aggregate AUM of those products were RMB5.07 trillion,RMB 2.27 trillion,and RMB 4.26 trillion,or 58.7%of the national total24.3.Private Fund ManagementAs of the end of the fourth quarter of 2021,there were 9,069 private securities fund managers in 3.1 Private Securities FundsAs of the end of the fourth quarter of 2021,there were 15,012 private equity and venture capital fund managers registered with AMAC,who were managing 45,311 products with a total AUM of RMB 13.14 trillion,an increase of RMB 1.58 trillion or 13.7%from the close of 2020.Among those,there were 30,800 private equity funds with a total AUM of RMB 10.77 trillion,an increase of 4.8%and 9.1%,respectively,from the close of 2020,and 14,511 venture capital funds with a total AUM of RMB 2.37 trillion,an increase of 39.6%and 40.2%from the close of 2020 22.3.2 Private Equity Funds and Venture Capital FundsChina,managing 76,818 funds with a total AUM of RMB 6.31 trillion,up RMB 2.01 trillion or 46.7%compared with the end of the fourth quarter of 202022.As of May 2022,there were 37 WFOE PFMs who were managing 217 products,of which 184 were active,with a total AUM of RMB 58.5 billion25.09|Overview of Fund Management Services in ChinaShanghai Guidebook for Overseas Asset Manager 202226 Official Website of the Shanghai Municipal Peoples Government27 Source:Wenhui Daily28 Source:The Global Financial Centres Index 31(GFCI 31)ReportChapter 3 Why Shanghai1.Shanghai Overview26 At the end of 2021,Shanghai had 16 districts with a total land area of 6,340.5 square kilometers and a permanent population of 24.8943 million at an average life expectancy of 84.11 years.Shanghais GDP in 2021 totaled RMB 4.32 trillion,equaling a per capita GDP of RMB 173,600,continuing to lead other provinces,municipalities,and autonomous regions.Located in eastern China where the Yangtze River meets the Pacific Ocean,Shanghai,together with the neighboring provinces of Zhejiang,Jiangsu,and Anhui,forms the Yangtze River Delta Region.This is one of the most developed,open,and innovative regions in China.The quickening integration of the region offers vast potential for Shanghais asset management sector.In 2021,Shanghai,Zhejiang,Jiangsu,and Anhui achieved a total GDP of RMB 27.61 trillion,or 24.13%of the national total.Of the top 10 cities by fiscal revenue,five(Shanghai,Suzhou,Hangzhou,Nanjing,and Ningbo)were from the region.This region also leads in terms of the populations wealth,accounting for 6 of the countrys top 10 cities by per-capita disposable income in 2021.The introduction of the Yangtze River Delta integration strategy has made it even easier for financial institutions to develop and expand their wealth management business from Shanghai to the whole region.According to the Implementing Plan for the 14th Five-Year Plan for the Integrated Development of the Yangtze River Delta Region,by 2025,the region will achieve substantial integration,such that 70%of the permanent population will live in urban areas;research and development investment will make up 3%or more of the GDP;and the public spending will reach RMB 21,000 per capita.Shanghai has one of the most complete financial market systems among Chinese cities.It operates stock,bond,currency,foreign exchange,gold,futures,insurance,commercial papers,and trust markets and offers a robust platform for the efficient allocation of financial assets,especially RMB-denominated assets.In 2021,Shanghais financial market posted an aggregate turnover of RMB 2,511.07 trillion and supplied more than RMB 18.3 trillion in direct financing.As of the end of 2021,there were 2,037 SSE-listed companies,up 13.17%from the end of 2020.Total market cap hit RMB 51.97 trillion,an increase of 14.14%year-on-year and ranking third worldwide.In 2021,SSE itself ranked third in the world by issuance size and fourth by trading turnover.In addition,the Shanghai Futures Exchange is the largest market for a number of futures products27 and was among the global top three by volume in spot gold and in crude oil futures.In 2021,the Global Financial Centres Index(GFCI)placed Shanghai fourth in its ranking28.3.An Open ShanghaiShanghai,bearing the urban spirit of“embracing diversity,pursuing excellence,and staying open-minded and humble”,distinguishes itself through its openness,innovation,and tolerancea vivid reflection of Chinas development and achievements in the new era.In terms of the opening-up history,few other Chinese 2.Complete Financial Market Framework Why Shanghai|10 29 Source:Official WeChat Account of the Shanghai Municipal Peoples Governmentcities are comparable with Shanghai.Shanghais development traces back to the Tang and Song Dynasties,when the city prospered due to maritime trade(through the Maritime Silk Road).The Yuan and Qing Dynasties witnessed the burgeoning of Shanghai,due to national strategic needs,economic interests,and its right geographical surroundings after its port was opened in 1843,immigrants from other provinces of China and other countries jointly contributed to the development and prosperity of the city,and thus Shanghai gradually formed a unique community of shared common interests of Chinese and foreigners.As a rare safe harbor during the turbulent times,a large number of populations,industries,capital,technologies,information,and cultures.In particular,young immigrants with different backgrounds who were not content with their situation poured into Shanghai,which maintained the citys momentum of rapid development.Backing onto the Yangtze River and facing the Pacific Ocean,Shanghais open attitude is fundamental to its success.High-quality opening up has always been an essential path to Shanghais high-quality development.“Embracing diversity”is the most cherished element in Shanghais urban spirit.Shanghai,as a stage for elites to strive together,excels in its tolerant culture,prosperous and diversified economy,free and harmonious thinking,among many other aspects.Shanghai is one of the best places in China for financial development and has all the necessary infrastructures for the efficient allocation of global resources.It is the first city in China to establish a financial court,a court for financial arbitration,a financial consumer protection bureau,and a financial dispute resolution center and the first to release a white paper titled“Building a Rule-of-Law Environment for the Shanghai International Financial Center”.It is home to the PBOCs Credit Reference Center which has created a national basic database for business and individual credit information.The city boasts nearly 500,000 financial professionals and a wide range of specialized service providers such as accounting firms,law firms,and 4.Excellent Business Environmentrating agencies.Shanghai has also been adopting an ever-tougher stance against illegal financial activities.In 2020,Shanghai unveiled the 3.0 version of its business environment improvement plan to fully promote its one-stop government service portal and build a more internationally competitive business environment.At an executive meeting in September 2021,the State Council approved the Opinions on Launching Pilot Programs on Innovation in Business Environment,naming Shanghai among the first wave of cities to pilot policy innovations in relation to the business environment.In December 2021,the Shanghai Municipal Government issued the Implementation Plan of Shanghai Municipality for Launching Pilot Programs on Innovation in Business Environment,introducing 172 reform measures covering market ecosystem,government affairs,investment,foreign business related,innovation,and regulatory environment,enterprise full cycle services,innovation engine,regional cooperation,and legal environment29.In addition,in the Doing Business 2020 report released by World Bank in July 2021,China climbed from the 36th place to the 28th in the ranking for protection of minority investors.As a demonstration city of China,Shanghai has in place sophisticated frameworks for protecting minority investors.Under the supervision of CSRC Shanghai Office,the Shanghai Joint Peoples Mediation Committee for Securities,Fund,and Futures Disputes provides professional mediation services.The China Securities Investor Services Center,also established in Shanghai,offers yet another safeguard for minority investors.Furthermore,in October 2020 the Shanghai Investor Protection Union was founded in Shanghai at the sponsorship of 30 organizations including the CSRC Shanghai Office,Shanghai Municipal Financial Regulatory Bureau,and the Shanghai Financial Court.Shanghai is one of the Chinese cities boasting the most complete range of financial institutions.They produce strong synergies and provide a solid foundation for the global expansion of Shanghai-5.Full Range of Financial Institutions11|Why ShanghaShanghai Guidebook for Overseas Asset Manager 2022Chinese financial authorities have released numerous policies to support financial reform and innovation in Shanghai.In August 2013,the State Council approved the creation of the China(Shanghai)Pilot Free Trade Zone(“Shanghai FTZ”),which was inaugurated in September 29 to explore financial innovation.This was followed up by the creation of the Lin-gang Special Area with the August 2019 release of the General Plan for the Lin-gang Special Area of China(Shanghai)Pilot Free Trade Zone by the State Council.February 2020 saw the issuance of the Opinions on Further Expediting the Building of Shanghai into an International Financial Center and Orienting the Financial Sector to Support the Integrated Development of the Yangtze River Delta,which contains detailed measures for encouraging pioneering financial reforms in the Lin-gang Special Area.At present,the financial asset investment companies of the Big Five banks of China(ICBC,Bank of China,China Construction Bank,Agricultural Bank of China,and Bank of Communications)have been 6.Innovations in Financial ReformFintech has revolutionized how we work and live.Global networks and cutting-edge technologies such as AI provide the technical foundations for the smarter and more efficient global investment activities of the asset management industry.Shanghai is one of the most important hubs in China for fintech enterprises.It was where Chinas first fintech firm,CCB Fintech,7.Cutting-Edge Fintechbased asset management institutions.The number of licensed financial institutions operating in Shanghai has risen from 1,515 in 2016 to 1,707 at the end of 2021,around 30%of which are foreign-funded30.At the end of 2021,17 of the worlds top 20 international asset managers have established their business entities in Shanghai31;more than 80 prominent international asset managers have enrolled in Shanghais Qualified Foreign Limited Partners(QFLP)pilot scheme and more than 50 domestic asset managers in its Qualified Domestic Limited Partners(QDLP)pilot scheme.As of the fourth quarter of 2021,29 of the 33 WFOE PFMs registered with AMAC were based in Shanghai32.Shanghai has become the first choice for China-based subsidiaries of foreign-funded financial institutions.In addition,2,234 equity investment managers are registered in Shanghai;Shanghai-based insurance asset management companies and public funds account for more than 30%of the total AUM of such firms nationwide.approved to engage in equity investment other than for debt-for-equity swap in Shanghai;banks wealth management subsidiaries to set up Shanghai-based subsidiaries specializing in equity investment and direct investment;overseas financial institutions to establish and invest in pension management companies in Shanghai;and insurance asset management companies to establish specialized asset management subsidiaries in Shanghai.In July 2021,the CPC Central Committee and the State Council jointly issued the Guidelines on Supporting the High-Level Reform and Opening-Up of the Pudong New Area and Building It into a Pioneer Area for Socialist Modernization.The Guidelines calls for strengthening the market,product offerings,institutions,and infrastructures of the financial sector;supporting the Pudong New Area to develop the offshore RMB market and offer cross-border trade settlement and overseas financing services;building a trading platform for international financial assets;and enhancing Chinas influence in the pricing of key commodities.In addition,on August 12,2021,the 14th Five-Year Plan for the Development of the Lin-gang Special Area of China(Shanghai)Pilot Free Trade Zone was released.According to the Plan,the Lin-gang Special Area will focus on building the digital economy and shaping itself into an international data hub during the 14th Five-Year Plan period.The Plan has for the first time proposed security evaluation and a public service platform for cross-border data flows to ensure they are secure and controllable,and permits the testing of non-local storage of data of specified domains if those data do not involve state secrets or personal privacy.30 Source:Wenhui Daily31 Source:Yicai32 Source:Wenhui Daily Why Shanghai|12 33 Source:TheP34 Speech by Wu Qing,Member of the Standing Committee of the CPC Shanghai Municipal Committee and Vice Mayor of Shanghai,at the 2021 Shanghai International Financial Center Development Forum on December 25,2021Shanghai has a wealth of higher education resources.In 2021,Shanghai boasted 64 colleges and universities with an enrollment of 548,700 students and 135,700 students graduated.At present,there are close to 500,000 financial professionals working in Shanghai34.In addition to its impressive roster of top universities,Shanghai is also reforming its talent program by introducing a broad range of support services to attract financial institutions and professionals alike.8.A Deep Talent Poolwas established,in 2018.National commercial banks followed CCBs footsteps with the creation of fintech subsidiaries such as BOC Fintech,BOCOM Fintech,and CIB Fintech.In 2020,HSBC Fintech Services(Shanghai),the first foreign-funded fintech company,was established in the Lin-gang Special Area.Also in that year,the Shanghai Insurance Exchange launched the Insurance Exchange Chain system which applies blockchain technology to insurance transactions33.In August 2021,the 14th Five-Year Plan for the Building of Shanghai International Financial Center was unveiled,making it clear that Shanghai would build itself into“two centers”,i.e.a global asset management center and a fintech center.At the 3rd Shanghai Fintech International Forum&1st Yangtze River Delta Fintech Conference held on December 4,2021,a number of key initiatives were launched to shape Shanghai into an international financial center,including CSRCs announcement to pilot fintech innovation in Shanghais capital market;PBOCs publication of a group standard entitled Specification for Credit Integration Service of Yangtze River Delta Credit Chain;inauguration of the“Finance Technology”industrial zone centered on the Longyang Road;establishment of the Data Industrialization Special Committee of Shanghai Fintech Industry Alliance;publication of the Blue Book on Financial Application of Privacy-Preserving Computation spearheaded by the Bank of Communications;and signing of agreement for Shanghai Financial Technology Equity Investment Fund(Limited Partnership).13|Why ShanghaShanghai Guidebook for Overseas Asset Manager 2022As of the end of June 2022,67 of the 153 public fund management firms in China was based in Shanghai35,among which are 24 wholly foreign-owned and joint venture fund companies.Over 50%of all joint venture and solely-owned fund companies in China had office locations in Shanghai.As of the end of June 2022,Shanghai-based public fund managers managed 3,793 public fund products with a total AUM of RMB 9.83 trillion.Non-money market funds contributed RMB 6.45 trillion or 65.6%Chapter 4 Overview of the Fund Management Industry in Shanghai1.Public Fund Management Industryof this total,higher than the industry average of 60.46.Over the past five years,the AUM of the funds managed by Shanghai-based public fund managers has seen steady growth particularly in their active management capability.As of the end of 2021,the AUM of the public funds,funds excluding money market fund(MMF),and equity funds managed by Shanghai based companies accounted for 37%,40%,and 43%,respectively,of the national total36.Table 3:Public Fund AUM by City(by regulatory jurisdiction,as of June 30,2022)37CityAUM(tn)Public Fund ProductsShanghai9.833,793Shenzhen6.662,581Beijing5.532,269Guangdong2.93674Figure 3:AUM of Public Funds Managed by Fund Companies in Shanghai and China over the Past Five Years(tn)35 Source:List of Public Fund Management Companies(June 2022),CSRC36 Source:SAMA37 Source:Data from Wind,prepared by Shanghai Asset Management Association201720182019202020213.5211.604.2413.035.2114.777.469.5619.8925.5637.517.405.272.540.34%ShanghaiChinaShareOverview of the Fund Management Industry in Shanghai|14 As of the end of June 2022,there were 4,462 PFMs registered in Shanghai.Together they manage 37,812 funds with a total AUM of RMB 5.07 trillion.These figures made Shanghai first in China38.over the past five years,the number and AUM of 2.Private Fund Management IndustryFigure 4:AUM of Funds Excluding MMF Managed by Fund Companies in Shanghai and China over the Past Five Years(tn)38 Source:Monthly Reports on Registration of Private Fund Managers and Filing of Private Fund Products,AMACShanghaiChinaShare201720182019202020211.974.862.185.423.137.655.026.4411.8416.0940.53.22.02.92B.40%Figure 5:AUM of Equity Funds Managed by Fund Companies in Shanghai and China over the Past Five Years(tn)ShanghaiChinaShare201720182019202020210.982.700.902.181.373.192.833.716.428.6336.30A.28B.95D.08B.99%the funds managed by Shanghai-based PFMs have maintained growth along with the steady increase in the AUM of private funds nationwide,with each representing a considerable share of the national total.15|Overview of the Fund Management Industry in ShanghaiShanghai Guidebook for Overseas Asset Manager 2022Table 4:AUM of Private Funds by City(by registration,as of June 30,2022)CityManagersFundsAUM(tn)Shanghai4,46237,8125.07Beijing4,17921,1704.36Shenzhen4,13920,8472.29Shanghai provides a financial environment conducive to the development of private funds.In 2019,around a quarter of large PFMs with an AUM of more than RMB 10 billion were registered in Shanghai.As of the end of May 2022,of the 110 PFMs with such AUM,45 or 41%were registered in Shanghai,ranking Shanghai first in China39.Figure 6:Number of Private Funds Managed by Fund Companies in Shanghai and China over the Past Five YearsFigure 7:AUM of Private Funds Managed by Fund Companies in Shanghai and China over the Past Five Years(tn)2017201720182018201920192020202020212021124117968528173974642664183532327233224902052419100ShanghaiChinaShareShanghaiChinaShare28.46%.66(.12#.15!.47!.44.34.51.50(.76.9819.7613.7412.7811.103.705.072.952.742.48Since the first intruction of QFLP pilot scheme in 3.International Asset Management Firms2011,the Shanghai Municipal Financial Regulatory Bureau,Shanghai Municipal Commission of Commerce,Shanghai Municipal Administration for Market Regulation,and SAFE Shanghai Branch have established a working mechanism for the scheme.As of August 2021,the 79 participants of the QFLP pilot scheme had made an actual investment of RMB 42.3 billion in various projects,including 229 equity investment projects.These QFLP scheme participants focused investment on strategic emerging fields and made nearly 60%of their investments in biopharmaceutical,infrastructure and environmental 39 Source:Wind,prepared by SAMAOverview of the Fund Management Industry in Shanghai|16 4.Shanghai Asset Management Association(SAMA)40 Source:Yicaiprotection,Internet and information technology,and high-end manufacturing sectors,playing a positive role in the development of innovative high-tech enterprises and the creation of a virtuous circle and interaction among the financial sector,the sci-tech sector and industries.In the past two years,as funds participating in the scheme entered the exit period,a stream of them had made a successful exit through diverse methods,including but not limited to listing,equity transfer,repurchase,transfer by agreement,and M&A40.The QDLP pilot scheme was first introduced in Shanghai in 2013.As of the end of 2021,more than 50 globally renowned asset management firmsamong them BlackRock,Azimut,Baillie Gifford,Oaktree Capital,Barings,PIMCO,Credit Suissehad established their presence in Shanghai and are qualified for the pilot scheme.The QDLP pilot scheme enables overseas asset management firms to glean insight into the Mainland China market,test their business models,and understand Mainland investors before expanding their business in China.As overseas asset management firms gain more business development experience in the Mainland,it has become an obvious trend for many overseas asset management firms that have set up an enterprise for participating in the QDLP pilot scheme to engage more deeply in the Mainland market by including but not limited to establishing PFMs,preparing to set up public fund management companies,or funding wealth management subsidiaries of Sino-foreign joint venture banks.In 2016,overseas financial institutions were allowed to set up private securities funds through WFOEs.Wholly foreign-owned private fund managers or WFOE PFMs are entities established in China by overseas asset management firms to provide private securities investment services.As of the end of 2021,29 of the 33 WFOE PFMs operating in China were based in Shanghai.Shanghai Asset Management Association(“SAMA”)was established on November 18,2010.Being rated as a 5A social organization,it is a non-profit social organization legal person voluntarily sponsored and formed by relevant enterprises in the fund industry in Shanghai.Under the supervision of the Shanghai Securities Regulatory Bureau,SAMA complies with national laws,regulations and policies,protects the legitimate rights and interests of its members,and acts as a bridge between the Shanghai fund industry and the government.It also organizes a wide range of specialized trainings and workshops and provides a platform for exchange and communication to promote the high-quality development of the fund industry in Shanghai.As of the end of June 2022,SAMA had 285 members,including 67 public fund companies,127 PFMs(including 23 WFOE PFMs),37 client-specific asset managers,22 Shanghai branches of non-Shanghai-based fund companies,and 32 independent fund distribution institutions.The AUM of the public fund management company members totaled RMB 12.22 trillion,accounting for nearly 40%of the national total,while that of the PFM members amounted to around RMB 1.79 trillion,accounting for 35%of the total AUM of PFMs in Shanghai.In 2022,SAMA was awarded the title“National Outstanding Social Organization”by the Ministry of Civil Affairs,which is one of the most authoritative honors for social organizations in China.17|Overview of the Fund Management Industry in ShanghaiShanghai Guidebook for Overseas Asset Manager 2022Laws,Regulations,and Regulatory Policies|18 The legal cornerstone of Chinas public fund industry is the Securities Investment Fund Law of the Peoples Republic of China(“Fund Law”),which was promulgated in 2004 and revised twice in 2012 and 2015.The Fund Law,as the fundamental law of Chinas fund industry,sets a framework for the operation of fund managers and funds.In addition,relevant investment activities are also governed by the Securities Law and other relevant laws and regulations.According to the provisions of the Fund Law,CSRC will supervise and manage the activities of securities funds in accordance with the law,and its local branches will perform their duties in accordance with authorization;AMAC is a self-regulatory organization of the securities fund industry,which is subject to the instruction,supervision and management of CSRC.As the regulator,CSRC has formulated a number of regulatory provisions within the framework of the Fund Law,the most important of which include:(1)the Measures for the Supervision and Administration of Managers of Publicly Offered Securities Investment Funds,which regulates the establishment,change and operation and management of public fund managers;(2)the Administrative Measures on Securities Investment Fund Custody Business,which regulate the fund custody;(3)the Administrative Measures on the Operation of Publicly-Offered Securities Investment Funds,which regulate the investment restrictions and operation of funds;(4)the Chapter 5 Laws,Regulations,and Regulatory Policies1.Public FundsMeasures for the Supervision and Administration of Distributors of Publicly-Offered Securities Investment Funds,which regulate the distribution of securities funds;(5)the Administrative Measures on Information Disclosure of Publicly-Offered Investment Funds,which regulate the information disclosure of funds;and(6)the Measures for the Supervision and Administration of Directors,Supervisors,Senior Management Personnel and Other Practitioners of Securities and Fund Institutions,which stipulate the qualifications and code of conduct for directors,supervisors,senior management personnel and other practitioners of public fund managers.In addition,CSRC has formulated a large number of regulatory documents to regulate the development of the fund industry.Moreover,since April 2018,the Guiding Opinions on Regulating the Asset Management Business of Financial Institutions and its supplementary notices have been issued in succession to guide wealth management products in transforming towards being based on net asset value,no guarantee of rigid payment,transparency in and standardization of invested assets,etc.The public fund sector has set a benchmark for the asset management industry through its complete implementation of trust relationships,thorough protection of investors rights and interests,and standardized and transparent product operation.As a self-regulatory organization,AMAC formulates self-regulatory rules according to the authorization of law and the instruction of CSRC.The self-regulatory rules provide important guidance on the operation 19|Laws,Regulations,and Regulatory Policies2.Private Asset Management Business of Securities and Futures InstitutionsBoth the Administrative Measures on Private Asset Management of Securities and Futures Institutions and the Administrative Provisions on the Operation of Private Asset Management Schemes of Securities and Futures Institutions,the two major regulatory documents issued by the CSRC regarding private asset management products,refer to the Fund Law as their superior law.Therefore,the Fund Law is also the fundamental law for private asset management products.CSRC and AMAC have issued,respectively,as the regulatory body and the self-regulatory organization,a large number of regulatory provisions and self-regulatory rules applicable to private asset management products,covering broad areas such as product fundraising,investment,operation,and compliance for private asset management products.The Fund Law revised in 2012 was promulgated and came into force on June 1,2013.One of the highlights of this revision is to subject the private securities funds(“private funds”)to the Fund Law,which marks the official initiation of PFMs that can independently issue and manage funds.The Fund Law is also the fundamental law for private funds.In addition,relevant investment activities are also governed by the Securities Law and other relevant laws and regulations.According to the Fund Law,CSRC is the regulator of the fund industry.Within the framework of the Fund Law,CSRC has formulated the Interim Measures on the Regulation of Private Investment Funds and Certain Provisions on Strengthening the Regulation of Privately Offered Investment Funds.In addition,the regulatory documents formulated by CSRC for certain fields(e.g.,the Administrative Measures on the Suitability of Securities and Futures 3.Private FundsFigure 8:Legislative Framework for Public FundsNPC Standing CommitteeSecurities Law,Fund LawSelf-disciplinary rulesGuidelines,Notices and Other Normative DocumentsRules for Fund Companies,Fund Custody,Fund Operation,Fund Sales,Information Disclosure,and AppointmentCSRCAMACand practice of the fund industry,covering company regulation,practitioner management,fund custody,fund distribution,fund investment,trading,fund information disclosure,fund accounting,taxation and dividends,and information technology.Fund managers are required by law to join AMAC as AMAC members and be bound by its articles of association.Shanghai Guidebook for Overseas Asset Manager 2022Laws,Regulations,and Regulatory Policies|20 Investors)also apply to private investment funds.According to the provisions of the Fund Law,AMAC is the self-regulatory organization of the fund industry and is subject to the instruction and supervision of CSRC.According to the Fund Law,fund managers and fund custodians are required to join AMAC and fund service providers are allowed to join AMAC.Similar to the practice in the public fund sector,AMAC,as a self-regulatory organization,formulates,updates,and implements self-regulatory rules on private investment funds in accordance with the authorization of law and CSRC and in light of market conditions.However,different from the practice in the public fund sector,according to the Fund Law,AMAC is also responsible for the registration of private investment fund managers and filing of private investment funds according to the law.In other words,AMACs self-regulatory management of private funds is more comprehensive.In this regard,AMAC has formulated and issued many self-regulatory rules on fundraising,fund service and information disclosure,etc.,of private investment funds,including but not limited to the Guidelines on the Internal Control of Private Investment Fund Managers,the Guidelines on Private Investment Fund Contracts,the Administrative Measures on the Offering of Private Investment Funds,the Administrative Measures on the Activities of Information Disclosure of Private Investment Funds,the Implementing Guidelines on the Investor Suitability Management of Fundraising Institutions(For Trial Implementation),and the Measures for the Administration of Business of Private Investment Fund Services(For Trial Implementation).At present,all public funds in China are contractual(i.e.,unit trust)funds based on the legal relationship of trust,under which the fund manager and the fund custodian jointly act as the trustee,and the fund unitholder is both the principal and the beneficiary.Chapter 6 Fund Types and Legal Framework1.Public FundsThe dual-trustee legal structure consisting of the fund manager and the fund custodian is unique to Chinese funds and rarely seen in most of other countries and regions.Under this structure:1)The functions and powers of the fund manager are as follows:raising funds and handling the issuance and registration of fund units according to the lawApreparing interim and annual fund reportsFhandling the fund filing proceduresBseparately managing and keeping accounts of different fund assets under management,and investing in securitiesCdetermining the fund dividend distribution plan according to the fund contracts,and making dividend distribution to fund unitholders in a timely mannerDcarrying out fund accounting and preparing fund financial accounting reportsEcalculating and announcing the net asset value of funds,and determining the subscription and redemption prices of fund unitsGhandling information disclosure matters relating to fund assets management activitiesHconvening the fund unitholders meeting in accordance with relevant provisionsIother duties prescribed by the securities regulatory authority under the State CouncilLmaintaining records,books,statements,and other relevant materials of fund assets management activitiesJexercising litigation rights or taking other legal actions for the benefit of fund unitholders in the name of fund manager;andK21|Fund Types and Legal FrameworkShanghai Guidebook for Overseas Asset Manager 2022Fund Types and Legal Framework|22 2)The functions and powers of the fund custodian are as follows:undertaking safekeeping of fund assetsAopening fund accounts and securities accounts of fund assets in accordance with relevant provisionBsetting up separate accounts for different fund assets under custody to ensure the integrity and independence of fund assetsCmaintaining records,books,statements,and other relevant materials of fund custody activitiesDhandling settlement and clearing matters timely in accordance with the fund contracts and the investment instructions of the fund managerEhandling information disclosure matters relating to fund custody activitiesFissuing opinions on the funds financial and accounting reports,interim and annual fund reportsGreviewing and examining the net asset value of the fund assets and the subscription and redemption prices of fund units calculated by the fund managerHconvening the fund unitholders meeting in accordance with relevant provisionsIsupervising the investment operation of the fund managers according to relevant provisions;andJother duties prescribed by the securities regulatory authority under the State CouncilK3)Each fund unit has equal rights.The fund unitholders exercise their rights through the“unitholders meeting”.The fund unitholders meeting has the right to replace the manager/custodian,to adjust the remuneration of the manager and the custodian,to change the fund operating model,investment strategy or distribution mechanism,to decide on the termination and liquidation of the fund,etc.Public funds must be issued and managed by public fund managers and be under the custody of fund custodians.According to the data released by CSRC,as of the end of June 2022,there were 58 fund custodians in total in China41,among them are 27 securities companies,China Securities Depository and Clearing Corporation Limited(CSDC),China Securities Finance Corporation Limited,and 29 commercial banks.Under the Fund Law,the fund manager may appoint a fund service providers to handle the units registration,accounting,valuation,investment adviser and other matters for the fund,and the fund custodian may appoint fund service providers to handle the accounting,valuation,review and other matters for the fund;however,the liabilities of the fund manager and the fund custodian under the law will not be exempted due to such appointment.41 Appendix 4 List of Securities Investment Fund CustodiansMost of the private asset management products issued by public fund management companies,securities companies,futures companies are contractual products based on a legal relationship of trust,under which the manager and the custodian of the private asset management product jointly act as the trustee,and the unitholder is both the principal and the beneficiary.Under this structure:1)The core functions and powers of the manager upon entrustment are:to undertake investment management,to conduct valuation and accounting as the party responsible for accounting matters,to handle unit registration,and to exercise rights of action or take other legal actions on behalf of investors.2.Private Asset Management Business of Securities and Futures Institutions23|Fund Types and Legal Framework2)The core functions and powers of the custodian upon entrustment are:to preserve the assets of the private asset management product,to carry out clearing and settlement according to the managers investment instructions,to supervise the investment operation of the manager,and to disclose information related to the custody.Different from public funds,a single asset management scheme(i.e.,a private asset management product that is issued for a specific single investor)may,according to the asset management contract,choose not to engage a custodian for custody,if it has set out measures for the safety of its assets and dispute resolution mechanisms in the assets management contract.3)The units of the asset management scheme at the same level share the same rights and risks.The unitholders of private asset management products will exercise their rights in accordance with laws,regulations,and relevant asset management contracts.Slightly different from public funds,private asset management products may or may not set up the unitholders meeting mechanism.The unitholders of private asset management products without unitholders meeting mechanism may exercise their rights in accordance with laws,regulations,and relevant asset management contracts.As with pubic funds,the manager or the custodian of private asset management products may appoint service providers for the asset management product,provided that the fiduciary duties of the custodian cannot be outsourced,and the liabilities of the manager and the custodian under the law will not be exempted due to such appointment.3.Private Funds3.1 Types of FundsIn the Mainland China market,private funds can be classified by different sets of criteria.A common classification is by the type of target investment 3.2 Legal StructureThe legal structures of private funds vary depending on their form of organization.Specifically:(1)Contractual fundsAll types of private funds can be structured as contractual or unit trust funds.In practice,the contractual structure is commonly seen in private securities funds,but seldom in private equity funds.Like public funds,contractual private securities funds are all based on the legal relationship of trust,under which the fund manager and the fund custodian jointly act as the trustee,and the fund unitholder is both the principal and beneficiary.Under this structure:1)The core functions and powers of the fund manager upon entrustment are:undertaking investment management,conducting valuation and accounting as the party responsible for accounting matters,handling unit registration,exercising shareholders rights on behalf of the fund,and supervising the fund custodian.2)The core functions and powers of the fund custodian upon entrustment are:preserving the fund assets,carrying out the managers investment and market,by which private funds are divided into private securities funds and private equity funds.A third type is private asset allocation funds,which permit investment across different asset classes.However,this third type is rare and the requirements are also higher for both the registration of the managers and the filing of the products.For instance,the initial assets raised by a private asset allocation fund should not be less than RMB 50 million.By the form of organization,private funds can be divided into contractual private funds,corporate private funds,and partnership private funds.By investment approach,private funds can be categorized into direct investment funds,which invest directly in the target companies,and indirect investment funds(or FOFs),which invest in other private funds.Shanghai Guidebook for Overseas Asset Manager 2022Fund Types and Legal Framework|24 instructions,conducting compliance review of the investment instructions,handling funds transfers,reviewing valuation and information disclosure,and supervising the fund manager.3)Each fund unit has equal rights.The fund unitholders exercise their rights through the“fund unitholders meeting”.The fund unitholders meeting has the right to replace the manager/custodian,to adjust the remuneration of the manager and the custodian,to change the fund operating model,investment strategy or distribution mechanism,and to decide on the termination and liquidation of the fund.As with public funds,the fund manager and the fund custodian of private securities funds may appoint service providers for the fund,provided that the fiduciary duties of the custodian cannot be outsourced,and the liabilities of the manager and the custodian under the law will not be exempted due to such appointment.(2)Partnership fundsAll types of private funds can be structured as partnership funds.Different from the contractual structure,the partnership structure(mostly the limited partnership structure)is the usual choice for private equity funds,but less so for private securities funds.A partnership fund may be managed by its general partner or a manager hired by the general partner.For this latter option,the manager needs to be a related party of the general partner.The responsibilities of the manager include looking for potential investees,conducting due diligence investigations,developing investment strategies,making investment decisions,and performing post-investment management.In addition to investment-related responsibilities,the manager performs other responsibilities,including but not limited to raising funds and submitting quarterly,annual and major event reports to AMAC.The partnership structure has tax advantages as income tax is levied on the taxable income allocated to each partner,not on the income of the partnership fund before that allocation.(3)Corporate fundsA corporate fund is an independent legal entity established with capital contributed by investors,who will exercise rights and assume obligations and responsibilities as its shareholders in accordance with its articles of association.A corporate fund may be managed by itself or by any other private fund manager engaged by it.Corporate funds are governed by the Company Law of the Peoples Republic of China in their management structure.This type of fund is rare in practice for the consideration of tax because corporate income tax applies at the fund level.25|Application and Approval of Products and Institutions Chapter 7 Application and Approval of Products and Institutions 1.Public Funds1.1 Establishment of Public Fund Management CompaniesPublic fund management companies that are established upon approval by CSRC may raise funds and manage public funds.In accordance with the provisions of the Fund Law,the fund assets shall be used for the following investments:(1)listed stocks and bonds;and(2)other securities and derivatives thereof prescribed by CSRC.Please see Section 1.3 of this Chapter for other asset management businesses public fund management companies may conduct.The following conditions shall be met to establish a public fund management company:1)Shareholders.The Fund Law and CSRC impose relatively complicated requirements on the qualifications of each type of shareholder of public fund management companies.In short,shareholders of public fund management companies can be divided into three types:major shareholder(s)(i.e.,shareholders holding 25%or more of equity,or the largest shareholder holding 5%or more of equity if there are no shareholders holding 25%or more of equity),non-major shareholder(s)holding 5%or more of equity,and non-major shareholder(s)holding less than 5%of equity.Furthermore,after a public fund management company is established,in case of any change in shareholders representing 5%or more of equity,including the appearance of shareholders holding 5%or more of equity through transfer of 5%or more of equity or subscription of 5%or more of(i)It and its controlled entities have good credit and compliance records,good asset quality and financial position,sound corporate governance,well-established internal control system,effective risk control,and the ability to support the WFOE FMC in improving the latters comprehensive competitive edge;(ii)It is an institution that engages in the financial business or manages financial institutions according to law;it has good management performance,social reputation,and net assets of not less than RMB 200 million or its equivalent in a freely convertible currency in the last year;it has been continuously profitable during the last three years;its participation in the WFOE FMC is in line with its long-term strategy and in the increased registered capital,the qualifications of the new shareholder(s)are also subject to CSRCs prior review and approval.The requirements on the qualifications of the sole shareholder of a wholly foreign-owned public fund management company(“WFOE FMC”),which basically combine the requirements on major shareholders,overseas shareholders and actual controllers as prescribed in the Measures for the Supervision and Administration of Managers of Publicly Offered Securities Investment Funds,are as follows:a)The major shareholder of the WFOE FMC shall meet the following requirements:Shanghai Guidebook for Overseas Asset Manager 2022Application and Approval of Products and Institutions|26 b)The overseas shareholder of the WFOE FMC shall meet the following requirements in addition to those set out in a):(i)It is a financial institution with experience in financial asset management or an institution which manages financial institutions,which is duly incorporated and lawfully exists under the laws of the country or region where it is incorporated;it has a sound internal control mechanism;it has complied with the legal provisions and regulatory requirements of jurisdiction of its incorporation regarding major regulatory indicators during the last three years;(ii)Its domicile country or region has well-established securities laws and regulatory system,whose securities regulatory authority shall have entered into a memorandum of understanding on the cooperation in securities regulation and maintain effective regulation cooperation with CSRC or such other institutions as recognized by CSRC;(iii)It has good international reputation and operating performance;it has been internationally leading in terms of financial assets under interest of its main business(if it is an institution that manages financial institutions,at least one of the financial institutions under its management shall satisfy the requirements of this(ii)and relevant requirements of CSRC);(iii)It has a practicable plan to improve the WFOE FMCs corporate governance and promote the WFOE FMCs long-term development and possesses the capital replenishment capacity commensurate with the WFOE FMCs business operation;(iv)It has a clear self-restraint mechanism to maintain the independent operation and management of the WFOE FMC and to prevent transmission of risks and improper benefits;(v)It has in place a reasonable and effective risk resolution plan to address potential risks that may disrupt the business operation of the WFOE FMC;(vi)It has no record of material violations of laws and regulations or of material dishonesty in in the last three years;it has not been imposed with criminal penalties for intentional criminal offenses,or if so,it has completed such criminal penalties for no less than 3 years;it is not under investigation or rectification for major violations of laws and regulations;(vii)It is not involved in any circumstance that prevents it from exercising rights or performing obligations as the shareholder,such as failure to conduct business operation for a long time,suspension of business,bankruptcy and liquidation,defective corporate governance,and dysfunctional internal control;and it is not involved in guarantee,litigation,arbitration or other major events that may adversely affect its sustained operation;(viii)It has a clear equity structure at each level tracing back to the ultimate beneficial owner;its equity structure does not involve any asset management product unless otherwise approved by CSRC;and(ix)It has neither been subject to substantial public skepticism for any dishonesty or non-compliance,nor through such dishonesty or non-compliance,caused a serious negative social impact yet to be eliminated;no less than 3 years have passed since it was held principally liable for the operational failure of its investee;and it has not committed any act that damages the interests of clients,such as misappropriation of clients assets.management,revenue,profit,and market share during the last three years;it has maintained a high credit standing for a long time during the last three years;(iv)Its cumulative shareholdings or proportion of equity holdings(including direct or indirect equity holdings)comply with Chinas policy on the opening-up of the securities industry;and(v)Other requirements prescribed under laws,administrative regulations,and by CSRC upon approval of the State Council.c)The actual controller of the WFOE FMC shall meet the following requirements.(i)Its net assets account for not less than 50%of its paid-in capital;(ii)Its contingent liabilities account for less than 50%of its net assets;(iii)It is not involved in any circumstance where it cannot pay any due debts;and(iv)The requirements as set out in(iii)through(ix)under a)above.2)Capital.Public fund management companies must be established in the form of company(instead of partnerships or any other form)with a registered capital of not less than RMB 100 million which shall be actually paid with cash from legitimate sources.Overseas shareholders shall make capital contributions in a convertible currency.3)Personnel.Public fund management companies are required to have the general manager,chief compliance officer,deputy general managers as necessary,and other senior management personnel.The number of such senior management personnel,together with the personnel engaging in research,investment,operation,sales,compliance,and other businesses,shall be not less than 30,and all of them must have obtained the fund practitioner qualification.4)Software and hardware facilities.Public fund management companies must have premises and IT systems that are sufficient to support their operation,which generally cover the aspects of investment management,registration,accounting,etc.5)Application procedures.The application procedures consist of two phases establishment application and on-site inspection.Currently,a public fund management company is established under the“approval first,preparation later”mode.Under this mode,relevant parties shall first apply to CSRC for establishing the public fund management company,during which period they will go through the steps of acceptance of application,review of shareholders qualifications and feedback of CSRC.During the preparation phase,which commences upon CSRCs approval of the establishment of the public fund management company,the applicant shall complete the work required for carrying out public fund management business,including staffing,technology systems,business premises and facilities.After the preparations have been completed and approved by CSRC upon on-site inspection,CSRC will issue a business permit to the established public fund management company,after which the company may carry out relevant businesses.Time required for the above procedures varies depending on such factors as the number of shareholders,the complexity of shareholders backgrounds,and the work progress of the companys preparation team.At present,CSRC requires that public fund management companies complete the preparation work within six months after obtaining the approval for their establishment.27|Application and Approval of Products and Institutions Shanghai Guidebook for Overseas Asset Manager 2022Figure 9 Application Procedures for Establishment of Public Fund Management Companies Supplementation at CSRCs request(if any)Application submission CSRC acceptance CSRC approval Onsite inspection Launch of the first public fund5 working days6 months(may be longer in practice)Generally 6 months6 months CSRC feedback Company registration CSRC licensing1.2 Registration of FundsIn accordance with the Fund Law,funds in China are subject to registration.According to the requirements of CSRC,public fund management companies are required to submit the fund contract,custody agreement,prospectus,legal opinion,and other registration application materials.The fund registration documents include:1)The fund contract,which is a fundamental legal document entered into by the manager,the custodian,and the fund unitholder.It is a trust contract setting out the rights and obligations of the fund manager,the custodian,and the fund unitholders.The fund contract generally includes the basic information of the fund,the filing of the fund contract,the effectiveness of the fund contract,the investment,subscription,redemption,and valuation of the fund,the distribution of income of the fund,modification/termination of the fund contract,liquidation of assets of the fund,rules of procedure of the unitholders meeting,and other aspects.2)The custody agreement,which is a bilateral agreement between the manager and the custodian setting forth such matters as mutual supervision,carrying out investment instructions,and clearing and settlement.3)The prospectus,which is an invitation for offer independently prepared by the manager.It sets out the funds basic information,distribution channel,and a summary of the fund contract and the custody agreement,through which investors may have a clear view of the elements and purchase method of each fund.According to relevant laws and regulations,CSRC shall make the decision on whether to approve the registration of the fund within six months after accepting the application,or for public funds to which streamlined procedures may apply,generally within twenty working days after accepting the application.The fund manager shall make an offering within six months after receiving the document on registration approval.Application and Approval of Products and Institutions|28 1.3 Licenses for Public Fund Management CompaniestPublic fund management companies,upon being duly established,are automatically licensed for public fund management and may concurrently 29|Application and Approval of Products and Institutionsapply for the license for private asset management business.In addition,where the requirements of relevant regulations on net assets,AUM,investment performance and staffing are satisfied,public fund management companies may further apply for the licenses for QDII,basic pension investment management,enterprise annuity investment management,social security fund investment management and other businesses,or issue single asset management schemes for insurance funds.1)License for the Private Asset Management BusinessAt present,except for a few newly-established companies,other public fund management companies have the license for private asset management business.Failing to apply for the license for private asset management business during the phase of establishment application,public fund management company must apply to CSRC separately after establishment.2)License for QDIIWith the QDII license,the public fund management company is entitled to raise funds within the foreign exchange quota granted by the foreign exchange administrative authority and invest in offshore markets.The QDII license is subject to the approval by CSRC.3)License for Enterprise Annuity Investment ManagersEntrusted by enterprise annuity trustees(e.g.,the pension company and enterprise annuity council),an enterprise annuity investment manager is to provide investment management services for enterprise annuity.This license is granted by the Ministry of Human Resources and Social Security of China after review by a panel.4)License for Social Security Fund Investment ManagersA social security fund investment manager,as a professional investment management institution,is to operate and manage Chinas social security funds pursuant to the contract.This license is granted by the National Council for Social Security Fund(“Social Security Fund Council”or“SSFC”).The SSFC reviews the qualification of investment managers in a prudent and strict manner.5)License for Basic Pension Investment ManagersBasic pension,including the pension for enterprise employees,staff of government departments and civic institutions,and urban and rural residents,is the most important part of Chinas pension security.In accordance with the Announcement on Assessment of Securities Investment Management Institutions for Basic Pension Insurance Funds issued by the Social Security Fund Council on October 26,2016,the basic pension investment manager shall have experience in managing domestic securities investments for national social security funds or managing investments for enterprise annuity funds.Upon review by the expert assessment committee organized by SSFC,this license is granted by the SSFC.6)Issuance of Single Asset Management Schemes for Insurance Funds Insurance funds refer to the capital,capital surplus,undistributed profits,various reserves and other funds,denominated in RMB and foreign currencies,of insurance group(holding)companies and insurance companies.According to the Notice of the CBIRC on the Investment of Insurance Funds in Financial Products issued by the CBIRC in April 2022,an eligible public fund management company may,by virtue of its license for private asset management business,issue a single asset management scheme for insurance funds of insurance group(holding)companies and insurance companies.7)Subsidiaries of Public Fund Management Companies for Engaging in Specified BusinessesThe subsidiaries of public fund management companies may engage in businesses related to asset management,including:private equity fund management,investment advisory,financial services for pension funds,distribution of financial products,unit registration,valuation and accounting,and Shanghai Guidebook for Overseas Asset Manager 2022Application and Approval of Products and Institutions|30 other businesses recognized by CSRC.The public funds managed by them include index funds,FOFs,pension investment products,and REITs,among others.In principle,such subsidiary shall be wholly owned by a public fund management company and be strictly and effectively segregated from the parent company in the line of business.It should be noted that the subsidiary of a public fund management company must meet the requirements for a new fund management company before engaging in the public fund management business,i.e.,if the public fund management company intends to establish a subsidiary for the public fund management business,the company must meet the requirements for major shareholders of a fund management company,and the subsidiary must meet the requirements for the personnel,hardware,policies,and other aspects of a fund management company.8)License for the Fund Investment Adviser BusinessIn October 2019,CSRC started the pilot scheme of fund investment adviser business based on the principle of“pilot scheme before steady expansion”.Pilot institutions,including fund management companies and their distribution subsidiaries,may engage in fund investment advisory business by accepting the appointment of clients to provide advice on fund investment strategies of investment portfolio and receiving direct or indirect economic.2.Private Asset Management Products of Securities and Futures Institutions2.1 Application for the License for Private Asset Management BusinessSecurities and futures institutions include securities companies,public fund management companies,futures companies,and their legally established subsidiaries engaging in the private asset management business.To engage in the private asset management business,a securities or futures institution shall meet the following requirements:1)complying with laws,administrative regulations,and CSRCs rules in terms of net assets,net capital,and other financial and risk control indicators;2)having a well-established corporate governance structure and sound internal control,compliance management and risk management policies;3)having qualified senior officers and three or more investment managers;4)having an investment research department with at least three full-time employees engaging in investment research;5)having business premises,security protection facilities and IT systems that comply with relevant requirements;6)not having been subject to any administrative or criminal penalty due to a material violation of the laws and regulations in the last two years,not having been subject to any administrative supervision measures by the regulatory authority due to a material violation of the laws and regulations in the past one year,nor being subject to investigation by the regulatory authority or competent authority due to a suspected material violation of the laws and regulations;and7)other requirements prescribed by CSRC based on the principle of prudent regulation.If a securities company,public fund management company,or futures company establishes a subsidiary to engage in the private asset management business and causes its investment research department to provide investment research services for the subsidiary,it shall be deemed to have met the requirement stipulated in Paragraph 4).In particular,a public fund management company or futures company that intends to engage in the private asset management business by itself,or a securities company,public fund management company or futures company that intends to establish a subsidiary to do so submit an application to CSRC for approval,while a securities company that intends to change its scope business(by adding the private asset management business)shall submit an application 2.2 Business Forms and Investment Operations of Private Asset Management ProductsPrivate asset management products can be privately offered only to qualified investors.Securities and futures institutions may either establish a single asset management scheme for a single investor or a collective asset management scheme for multiple investors.A collective asset management scheme shall have at least two investors and at most two hundred investors.By the type of assets invested,collective asset management schemes can be divided into fixed income schemes,equity schemes,commodity and financial derivative schemes,and hybrid asset management schemes.A private asset management scheme may invest in:1)bank deposits,inter-bank deposits,and standardized credit assets,including but not limited to bonds,central bank bills,asset-backed securities,debt financing instruments for non-financial enterprises and other credit assets that are traded on a stock exchange,the inter-bank market or any other trading venue established upon approval by the State Council,can be divided into equal shares,and have reasonable fair value and a well-established liquidity mechanism;2)listed companies stocks,depository receipts,and other standardized equity assets recognized by CSRC;3)futures,options contracts,and other standardized commodity and financial derivative assets that are traded and cleared in a centralized manner on a Type of InstitutionInvestable Asset ClassDescriptionSecurities companies and their subsidiaries engaging in the private asset management businessPublic fund management companiesSubsidiaries of public fund management companies engaging in the private asset management businessFutures companies and their subsidiariesThose referred to in Paragraph 1)to Paragraph 6)Those referred to in Paragraph 1)to Paragraph 4),and Paragraph 6)Those referred to in Paragraph 1)to Paragraph 6)Those referred to in Paragraph 1)to Paragraph 4),and Paragraph 6)Being allowed to invest in standardized assets and non-standardized assetsBeing allowed to invest in standardized assets only.When they invest in the products set out in Paragraph 6)(asset management products issued by other financial institutions),the underlying assets of such products shall also be standardized ones.Being allowed to invest in standardized assets and non-standardized assets,but avoiding horizontal competition with the parent companies(public fund management companies).Being only allowed to invest in standardized assets.When they invest in the products set out in Paragraph 6)(asset management products issued by other financial institutions),the underlying assets of such products shall also be standardized ones.to the CSRC regional office at the place where the securities company is domiciled for approval.31|Application and Approval of Products and InstitutionsShanghai Guidebook for Overseas Asset Manager 20222.3 Filing of Private Asset Management ProductsSecurities and futures institutions shall,within five working days after the establishment of a private securities and futures exchange or any other trading venue established upon approval by the State Council;4)public funds and asset management products administered mutatis mutandis to public funds recognized by CSRC;5)non-standardized credit assets,equity assets,and commodity and financial derivative assets other than those set out in Paragraph 1)to Paragraph 3);6)asset management products issued by institutions regulated by the financial regulatory authority under the State Council other than those set out in Paragraph 4);and7)other assets recognized by CSRC.Assets referred to in Paragraph 1)to Paragraph 4)are standardized assets,while those referred to in Paragraph 5)to Paragraph 6)are non-standardized assets.There are differences in the scope of standardized assets and non-standardized assets in which different types of securities and futures institutions may invest.The specific differences are as follows:Application and Approval of Products and Institutions|32 3.Private FundsPrivate investment fund managers may offer and manage private investment funds.According to the Fund Law,private securities funds may trade a company limited by shares public stocks,bonds,and fund units,as well as other securities and derivatives thereof prescribed by the CSRC.Private equity funds may invest in the equity of unlisted enterprises,the non-publicly offered or traded shares(including shares from private placement,block trade,or transfer by agreement)and convertible bonds of listed companies,market-based and legalized debt-to-equity swaps,units of equity funds,and other assets approved by CSRC.In addition,qualified PFMs may provide investment advisory services for asset management products as a third party,see section 4.A duly incorporated company may issue private investment funds only after being registered as a 3.1 Registration as PFMstasset management product,submit the asset management contract,list of investors and their subscription amount,capital verification report or asset payment certificate and other materials to AMAC for filing,with a copy to the dispatched offices of CSRC.Applying for account name&password via the via AMBERS of AMACPreparing applications and retaining PRC counsel to issue the legal opinionCompleting registration within 20 working days(excluding the time for preparing supplementation or making adjustments based on AMAC feedback)Online submission of the application via AMBERSReceiving AMAC feedback(if any)Responding to AMAC feedbackLaunching the first private fund within 12 monthsFigure 10:Application Procedures for Registration of PFMs33|Application and Approval of Products and Institutions3.1.1 General Conditions for Fund Manager RegistrationIn accordance with the Fund Law,the Interim Measures on the Regulation of Private Investment Funds,the Measures for the Registration of Private Investment Fund Manager and the Filing of Funds(For Trial Implementation)and other laws and regulations,AMAC is in charge of the PFM registration and sets out various requirements for private securities fund manager registration through relevant self-regulatory rules and operational guidelines,which mainly include:1)SpecializationPFMs shall observe the principles of specialization by establishing clear primary businesses and not concurrently engage in any business(e.g.,private lending,guarantee,factoring,pawning,finance lease,online lending information intermediary,crowdfunding,shadow margin financing,private financing,micro wealth management,microloan,P2P/P2B,real estate development,and trading platform)that may conflict with the businesses of the private funds they manage,any business that conflicts with the buy-side businesses of their investment management activities,nor any other non-financial businesses.Another example of the principles of specialization is that when applying for registration,a PFM shall choose only one registration category such as“private securities fund manager”or“private equity or venture capital fund managers”and only one of the business types associated with such registration category.A PFM may complete filing only for private funds that are consistent with its registered business type and shall not manage private funds that are not consistent with its registered business type.A PFM may not concurrently manage multiple types of private funds.Application requirements also differ for different registration categories.To enforce the specialization requirements,PFMs must include the words“private fund”,“private fund management”,or“venture capital”in their name and the words which reflect the features of the private funds they manage,such as“private investment funds management”,“private securities funds management”,“private equity fund management”,or“venture capital fund management”in their business scope.2)Internal ControlThe institution planning to apply for PFM registration shall establish a sound internal control mechanism,specify the duties of the internal control function,optimize its internal control measures,enhance the safeguarding measures for carrying out internal control duties,and carry out ongoing evaluation and supervision on internal control.3)CapitalAn applicant shall,based on its operation conditions and business development plan,make sure that it has sufficient capital to guarantee effective operation of the institution.AMAC generally requires that the capital of the applicant shall be sufficient to cover its daily operational expenses,including reasonable employee remuneration and rent,to ensure its normal operations for a reasonable period aft
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THE STATEOF GLOBAL AIR QUALITYFUNDING2022IIThe State of Global Air Quality Funding 2022The Clean Air Fund commissioned this report.Thank you to Climate Policy Initiative and everyone who contributed.ABOUT THE CLEAN AIR FUND The Clean Air Fund is a global philanthropic organisation that works with governments,funders,businesses and campaigners to create a future where everyone breathes clean air.We fund and partner with organisations across the globe that promote air quality data,build public demand for clean air and drive action.We influence and support decision makers to act on air pollution.ABOUT CLIMATE POLICY INITIATIVEClimate Policy Initiative is an analysis and advisory organization with deep expertise in finance and policy.Our mission is to help governments,businesses,and financial institutions drive economic growth while addressing climate change.Climate Policy Initiative has six offices around the world in Brazil,India,Indonesia,the United Kingdom,and the United States.ACKNOWLEDGEMENTSThis report has been made possible by the generous data sharing of leading foundations,ClimateWorks Foundation and Climate Policy Initiative.Authors include Baysa Naran,Costanza Strinati,Sean Stout,Jake Connolly,Paul Rosane,Scarlett Quinn-Savory,Tom Grylls and Oliver Courtney.Contributors include Dharshan Wignarajah,Caroline Dreyer,Barbara Buchner,Rob Kahn,Eve Alcock,Sue Wixley,Sean Maguire,Claire Godfrey and Michal Blaszczyk.Graphics and layout by Elana Fortin and Josh Wheeling.THE CLEAN AIR FUND IS FUNDED BY:IIIThe State of Global Air Quality Funding 2022FOREWORD As a Ugandan,my perspective on the climate crisis has been shaped by extreme weather events I have witnessed around me.Rising heat,droughts,landslides,floods Our communities are bearing the brunt of a crisis we didnt create,while global policymakers and leaders continue to delay real action.Because of this,I felt like I had to act.In 2019,I started striking in my hometown,Kampala,to help raise awareness about the climate crisis joining a global movement of millions of young climate activists.I want to talk about an often overlooked aspect of the climate crisis:toxic air pollution.This secret weapon remains hidden in plain sight,its connections to the climate emergency poorly understood.These days,few doubt the damage that fossil fuels are doing to the climate.But there is less attention paid to the havoc that air pollution from the burning of coal,oil and gas inflicts on our health.The effects that invisible particulate matter has on our lungs,hearts and brains are truly shocking.Simply put:fossil fuels are killing us.In 2019 alone,dirty air killed over one million people in Africa.In 2018,more than 9 million people died prematurely simply by breathing air made toxic from the burning of coal,oil and gas according to a Harvard study.And the devastating health impacts of air pollution cost countries billions.This trend is set to worsen as African economies industrialise,locking in infrastructure that pumps more carbon and other pollutants into the atmosphere.These policies are a death sentence for people in communities like mine.As UN Secretary-General Antonio Guterres has warned,investing in new fossil fuel production and power plants is“moral and economic madness”.But it is not too late to choose a different path,and there are plenty of reasons why we should do so.The 2022 IPCC report on mitigation showed that the financial value of health benefits from improving air quality alone would far exceed the costs of meeting the goals of the Paris Agreement.And yet,many donors and policy makers seem to be missing this opportunity.The State of Global Air Quality Funding 2022 shows that air quality receives less than 0.1%of philanthropic funding and only 0.5%of international development funding.Development funding commitments towards air quality have even declined in recent years.VANESSA NAKATE CLIMATE JUSTICE ACTIVISTIVThe State of Global Air Quality Funding 2022Despite flashy announcements on phasing out fossil fuels,since 2015 fossil fuel projects have received over four times more international development funding than air quality projects.When you look just at the African continent,36 times more of this money has been invested in fossil fuel projects than in clean air.We must start connecting the dots.Too often we treat climate change and air pollution as separate issues.It is shocking that 98%of international public climate finance fails to consider air pollution as an explicit priority.If we start prioritising air pollution,we can make a huge difference quickly.As an African country,Egypt,prepares to host the next UN climate summit,the message from this research is clear:invest in solutions which tackle air pollution and climate change together.It will save millions of lives,improve the health and well-being of billions of people around the world and pay for itself several times over.It is time for governments to hear the voices of people all around the world who are calling for leaders to clean up our air and protect our health.We cannot eat coal.We cannot drink oil.And we most certainly cannot breathe gas.ivVThe State of Global Air Quality Funding 2022CONTENTSEXECUTIVE SUMMARY 1KEY FINDINGS 3RECOMMENDATIONS 41.INTRODUCTION 81.1 CONTEXT 81.2 SCOPE OF THE ANALYSIS 122.INTERNATIONAL DEVELOPMENT FUNDERS 142.1 AIR QUALITY FUNDING 15DHAKA:SPOTLIGHTING URBAN AIR QUALITY 19CHINA:TURNING THE TIDE ON AIR POLLUTION WITH THE SUPPORT OF ADB FINANCE 242.2 AIR QUALITY AND CLIMATE FUNDING 25CHILE:JOINING-UP ACTION ON AIR QUALITY AND CLIMATE 312.3 FOSSIL FUEL-PROLONGING FUNDING 32PERSPECTIVES FROM PHILANTHROPIC FUNDERS 353.PHILANTHROPIC FOUNDATIONS 37STRENGTHENING AIR QUALITY LEGISLATION IN BRAZIL INSTITUTO CLIMA E SOCIEDADE 43IMPROVING AIR QUALITY IN AND AROUND LONDON SCHOOLS IMPACT ON URBAN HEALTH 464.STATE OF AFRICAN AIR QUALITY FUNDING 50MOZAMBIQUE:ENERGY TRANSITION AND CARBON LOCK-IN 55ANNEX:METHODOLOGY 57REFERENCES 611The State of Global Air Quality Funding 2022EXECUTIVE SUMMARY Its an overused cliche to talk about win-wins these days,but air pollution merits the label.This is a universal health problem 99%of the worlds population breathes air that exceeds World Health Organization air quality guidelines.Approximately 4.5 million people die every year as a result.At the same time,cleaning the air can be a massive opportunity.Because both air pollution and climate change are mainly caused by burning fossil fuels,they can be tackled together.Toxic air disproportionately affects the most vulnerable,so addressing it will also help reduce inequality.And because it massively hampers workforce productivity,initiatives which clean the air also serve to boost sustainable economic development.This report suggests we are missing a trick.By tackling these problems in isolation,funders,policymakers and other key players drastically overlook the potential of clean air to deliver benefits across the board.Ultimately,this tunnel vision is costing lives,hampering our climate efforts,stifling sustainable development and wasting aid money.This is not the first time weve made this point.Published each year,this report provides the only global snapshot of projects funded by donor governments and philanthropic organisations to tackle air pollution.Its purpose is to identify gaps in funding and opportunities for strategic investment and collaboration which will deliver clean air for all.It covers things like commitments made by each type of funder to date,trends over time,geographical distribution and methods of funding.In just one example of the scale of the opportunity we are missing,it finds that between 2015 and 2020 air pollution projects accounted for just 0.5%of total international development funding and less than 0.1%of philanthropic foundation funding.Given the damage we know air pollution does to our health,economies and environment,there is no sound financial or political argument for this underinvestment.We urgently need to significantly increase direct funding to tackle air pollution in its own right.2The State of Global Air Quality Funding 2022Accounting for air pollution impacts will also lead to better decisions in other key areas.Broadly speaking,when you factor in the benefits of cleaner air gained from climate actions,and vice versa,you strengthen the case for good solutions which presently lack funding or political support.That is why,as the world prepares for COP27 in Egypt,this research looks closely at funding that tackles both air quality and climate change together.Not only does this deliver synergies and efficiencies,air quality benefits provide quick,concrete wins which build public support for more climate action.Our analysis finds that a tiny portion-roughly 2%-of international public climate finance explicitly tackles air pollution.While this is alarming right now,it also points to scope for significant quick wins if we can join forces and tackle these challenges as two sides of the same coin.We are not there yet.Perversely,this research shows that several times more development funding is going to prolonging fossil fuel use than fighting air pollution.As the consequences of the climate crisis grow starker,this appears to be an exceptionally poor use of aid money.It urgently needs to change if we are to achieve the targets of the Paris Agreement or a host of the Sustainable Development Goals.Africa provides many of the starkest examples of this short-sighted and potentially counterproductive approach.Governments,banks and donor agencies committed 36 times more money to fossil fuel-prolonging projects in Africa than clean air measures in 2015-2021.Again,the findings also show what is possible if we shift our approach quickly and strategically and succeed in stopping air pollution from spiralling further as urbanisation and industrialisation on the continent increase at pace.Realising the potential of clean air to unlock solutions to some of our greatest challenges will not happen overnight or by itself.It will require coordination,collaboration and a willingness to take bold actions together.But there can be no doubt it will be worth it.More money,better spent,really can buy clean air.Governments and funders must act fast,starting with COP 27 in Egypt later this year.At the Clean Air Fund,we are here to help make it happen.KEY FINDINGS Philanthropic foundations In 2021,total air quality funding by philanthropic foundations rose by 36%to an all-time high of$63.8 million but remains less than 0.1%of total philanthropic foundation spending.More specifically:The substantial jump between 2020 and 2021 was partly driven by a small number of large grants,indicating an increased interest in air quality from big foundations and a shift in funding practices.The number of grantees receiving air quality finance continued to grow,reaching an all-time high in 2021.The US,China and India continued to receive the bulk of philanthropic foundation funding for air quality,while Africa,Latin America and the rest of Asia lagged behind.The majority of philanthropic foundation spending on air quality continues to come from foundations working on climate,environment or energy(CEE),though foundations focused on health,social justice and childhood development are increasingly engaging with the clean air agenda.The majority of foundation-funded air quality projects are simultaneously aiming to tackle climate change,however,just 2%of total foundation climate mitigation funding is realising the health and economic benefits associated with improved air quality.3The State of Global Air Quality Funding 2022International development funders Between 2015-2021,international development funders committed$11 billion(around$1.5 billion per year)to projects that purposely work to improve outdoor air quality.This accounted,on average,for just 0.5%of total international development funding,which totalled$1.9 trillion in 2015-2020(or$324 billion per year).More specifically:Grant funding,which is much needed to avoid saddling low-income countries with more loan debt,represented only 6%of total air quality commitments.Air quality funding was concentrated in a handful of Asian countries,while in regions such as Africa and Latin America it lagged behind.$7.6 billion of air quality funding(72%)simultaneously addressed climate change,largely via mitigation projects in the transport and energy sectors.Just 2.2%of international public climate finance-the share of international development funding contributing to the goals of the Paris agreement-explicitly tackles air pollution.This small proportion indicates that climate finance is a large untapped source of funding for the clean air agenda.Between 2015-2021,$46.6 billion was committed by international development funders to projects that prolonged the use of fossil fuels,more than four times the amount dedicated to air quality projects in the same period.4The State of Global Air Quality Funding 2022RECOMMENDATIONSTo accelerate action to curb the growing threat of global air pollution,we recommend the following actions by funders to increase the volume of funding for air quality,heighten its impacts,and build a stronger ecosystem for clean air action:All funders should:1.Significantly increase explicitly designated air quality funding,including within climate action and sustainable development programmes,demonstrating political urgency.Despite the short and long term benefits,not enough priority is given to integrating action on air quality,health and climate.Convening a global annual air quality stocktake that would celebrate improvements,highlight shortcomings and offer support to countries could galvanise momentum behind the clean air agenda and facilitate better coordination among donors to avoid duplicating efforts.2.Drive joined-up action on integrating air quality and climate into public and private investments and expenditure,including improving cooperation and coordination within government administrations,and with other stakeholders.Air pollution and climate action should be addressed via integrated approaches that consider synergies between complementary policy goals as well as potential negative trade-offs that would worsen air quality or slow climate action.Better accounting for climate finance with air quality co-benefits will allow funders to track and measure progress towards overlapping goals and increase the impact of their funding.3.Prioritise investment in air quality data programmes that make information and analysis publicly available,accessible and relevant.Data on air quality and the sources of local pollution are essential for identifying and managing effective,contextually-appropriate solutions.There is also opportunity to harmonise greenhouse gas emissions estimation methodologies with,and alongside,air pollution inventories to further joined-up action.4.Target air quality funding to underserved regions.Africa,Latin America and some regions in Asia consistently lag behind as recipients of funding from both philanthropic and development funders.By working together to understand and address funding gaps,funders can intervene early to reduce inequalities in access to clean air,prevent the problem getting exponentially worse,and achieve air pollution and climate benefits for almost half of the worlds population.5The State of Global Air Quality Funding 2022International development funders should:1.Develop and coordinate a global donor strategy spearheaded by champion governments-that aims to increase spending effectiveness and leverage from international public finance in reducing global air pollution.This means:A marked uplift in the scale of air quality spending worldwide,including efficiencies made by having a more joined-up approach with climate action and integration into infrastructure and service investments.Systematically capturing and communicating the health,environmental and development benefits of air quality expenditure to build awareness of it as a unique investment and impact opportunity.Actively seek a wider geographic spread in clean air investment portfolios.Using innovative financial instruments such as outcome based finance,guarantees and de-risking for eligible projects,to catalyse further investment in the clean air space.Committing to improve reporting of development funding of air quality to help better coordinate development activities,especially where funding comes from multiple government departments or agencies.2.Increase the volume of grant-based funding to tackle the inequitable air pollution-related disease burden in low-and middle-income countries.The majority of air quality funding is provided in the form of loans,which may aggravate the growing debt burden in low-and middle-income countries.Increasing the grant component of air pollution development assistance can help kickstart pollution-reducing projects in countries with limited public resources,and help to address the disproportionate air pollution-related disease burden they face.3.Phase-out all new investments in fossil fuel-prolonging activities while significantly upscaling investments in new clean technology and energy.Despite increased political momentum to phase out fossil fuels,development funding to fossil fuel-prolonging projects still outpaces air quality funding fourfold,jeopardising the clean air agenda,global climate goals,and development objectives more generally.Fossil fuel funding should be in exceptional cases only and should diminish swiftly,with the priority placed on investing in a just,clean transition.6The State of Global Air Quality Funding 2022Philanthropic foundations should:1.Invest more in improving ambient air pollution for better public health,childhood development,social justice,sustainable cities and climate outcomes.Different types of funders can increase their engagement with the issue in different ways:a.Climate,energy and environment funders should integrate air quality considerations and evaluations into a larger proportion of their work,uncovering previously unrealised health and economic impacts and simultaneously strengthening an additional push for reduced emissions.b.Funders working on health,early childhood development and cities and mobility,should accelerate air quality funding or start to fund such projects,focusing on synergistic areas e.g.,improving air quality around schools.c.There is a need for funders with specialist air quality programmes of work-especially those working on health,childhood development,equity,climate and urban design to help build clean air expertise,capacity and collaborations through their funding to advance progress.2.Funders making big bets on structural solutions to complex problems should both(i)consider air pollution as a worthy standalone area for investment that can achieve transformative impact;and(ii)deeply integrate air quality into project design and evaluation if the work covers key parallel topics such as fossil fuel use,non-communicable diseases and early childhood development.3.Consider how their grant funding can be used to develop proof of concept projects to help leverage investments from other funder types.Philanthropic foundations are able to pilot and innovate with more flexibility and tolerate higher levels of risk than development funders.As such,their funding can act as a stimulus,building localised cases for larger investments.4.Collaborate,pool funds and share learning and best practices to ensure existing and new funders achieve maximum impact.The number and breadth of foundations making air quality grants is rising year-on-year,including very large funders making grants on the issue for the first time in 2021.Coordination and knowledge sharing between existing and new funders is needed to ensure maximum impact.5.Apply a social justice and equity lens to air quality grant making to ensure that actions to improve ambient air quality are actively reducing the health and social disparities associated with air pollution,not maintaining or worsening them.“By working together to understand and address funding gaps for example by investing in under-funded regions in Africa,Latin America and Asia funders can achieve air pollution and climate benefits for almost half of the worlds population.”7The State of Global Air Quality Funding 20228The State of Global Air Quality Funding 20221.INTRODUCTION This is the fourth annual State of Global Air Quality Funding report.It provides an overview of funding flowing to projects that tackle air pollution between 2015 and 2021 from two sources:international development funders and philanthropic foundations.a The report identifies gaps and opportunities within the clean air funding landscape,examining how funding compares to the scale of the global air pollution crisis and to funding provided to fossil fuel prolonging projects which may work against the clean air agenda.This year for the first time,the report also focusses on international public climate finance flows and analyses the portion of air quality funding that simultaneously tackles air pollution and climate change(see Section 1.2 for more detail).The report is aimed at decision makers,policy makers,development practitioners and philanthropic foundations seeking to understand the current state of air quality funding and identify and respond to funding gaps on air quality.1.1 CONTEXTPoor air quality is a universal issue.Almost the entire global population(99%)breathes air that exceeds PM2.5 air quality guidelines set by the World Health Organization(WHO),with low-and middle-income countries suffering from the highest exposures.1 The dire state of air quality worldwide is a silent pandemic,with approximately 4.2 million people dying every year as a result of exposure to outdoor air pollution.Air pollution is the most dangerous environmental threat to human health,alongside climate change,2 and is the fifth biggest killer by health risk factor.3 It causes asthma,strokes,heart attacks and dementia,stunts the lung growth of children and inhibits their learning at school.Furthermore,particulate air pollution is found to take 2.2 years off global average life expectancy.4 This is more than three times that of alcohol use and unsafe water;six times that of HIV/AIDS;and 89 times that of conflict and terrorism.5a For the purposes of this report,international development funding includes all public sources of development finance and therefore does not include development funding from philanthropic foundations,which are analysed separately.“Poor air quality is a silent pandemic that disproportionately affects low-and middle-income countries”9The State of Global Air Quality Funding 2022Air pollution-related disease is influenced by income levels,access to nutrition and underlying diseases,with already vulnerable people and communities most at risk.6 As with the disproportionate impacts of the COVID-19 pandemic,the global air quality crisis compounds and worsens existing inequalities.At the same time,investments to improve air quality air bring enormous potential.Cleaning our air is a magic bullet that can solve some of societys biggest challenges at the same time,from public health to climate change,childhood development,social justice and sustainable economic growth(see Box 1.1).Although some types of air pollution temporarily mask warming,in general,the sources of air pollution and climate change overlap substantially.b Given these shared sources,action on air pollution and climate change can and should be joined-up.This will harness the synergies between complementary actions and deliver more cost effective,faster and fairer results with the same resources.Moreover,integrating immediate,local air pollution concerns that have tangible implications for individuals into longer-term climate strategies can help to increase buy-in on the latter,allowing benefits to be realised today rather than some time in the future.b It is important to note that not all air pollution affects climate.There are pollutants that could and should be controlled because of their impact on health alone.SOURCES OF AIR POLLUTIONAir pollutants are emitted from a range of sources and may have natural,anthropogenic or mixed origins.Natural sources include volcanic eruptions and wind-blown dust,while anthropogenic sources include:burning fossil fuels for electricity generation,transport,industry and households;industrial processes for example in the mining sector;agriculture;and waste management.Pollutants can be classified as either primary or secondary.Primary polluntants are those that are emitted directly from source,including nitrogen oxides(NOx),sulphur dioxide(SO2)and primary particulate matter(PM).Secondary pollutants on the other hand,form in the atmosphere as other pollutants interact with one another and include ground-level ozone and secondary PM.In this report ambient air pollution is considered broadly.The data on air quality funding does therefore not distinguish between pollutants.“Cleaning our air can be a magic bullet to solve some of societys biggest challenges at the same time”10The State of Global Air Quality Funding 2022THE BENEFITS THAT CLEAN AIR CAN DELIVERThe cost of cleaning up our air pales in comparison to the benefits of action:the financial value of the health benefits derived from better air quality are expected to exceed the costs of meeting Nationally Determined Contributions($7.5 trillion)submitted under the Paris Agreement.7 Policy makers must consider this against the annual global welfare costs of premature deaths attributable to PM2.5,which are projected to rise from$3 trillion in 2015(that is,4%of global GDP8)to somewhere in the range of$18-25 trillion by 2060,9 emphasising the significant returns to investing early.By supporting clean air efforts,funders can prevent premature deaths in the elderly population,10 and also prevent children from growing up unhealthy(childhood exposure has lasting impacts on lung function)11 and help halt the negative cognitive impacts of air pollution12(including earlier dementia).13 Thats because funding clean air is a leverageinvestment.It will achieve many positive knock-on impacts for health as well as climate.Just as the COVID-19 pandemic has been a key driver of public health policies worldwide,the year of COP27 can drive urgency and momentum to address the global air quality crisis,ensuring a healthy future for people and the planet alike.“The financial value of the health benefits derived from better air quality is expected to exceed the costs of meeting Nationally Determined Contributions(NDCs).”11The State of Global Air Quality Funding 2022BOX 1.1:AIR QUALITY AND THE SUSTAINABLE DEVELOPMENT GOALS Improving air quality directly supports the achievement of several of the UNs Sustainable Development Goals(SDGs).Policies and action tackling air pollution,for example,have a direct positive impact on population health(SDG3),further resulting in increased labour productivity and economic growth(SDG8)and better education(SDG4).c Building sustainable cities and communities(SDG11)relies on safe levels of PM2.5,while achieving universal access to sustainable energy(SDG7)implies shifting away from the dirty fuels that cause both outdoor and indoor(household)air pollution.In addition,the most vulnerable people and communities children,women and the elderly are usually those who suffer the most from air pollution;hence,policies and actions to improve air quality can also contribute to reducing inequalities(SDG10;SDG5).The links between air quality and climate action are firmly established.11 As both air pollution and climate change are mainly caused by burning fossil fuels,air quality action is also often climate action(SDG13).Tackling air pollution is critical to achieving most of the SDGs and a sustainable future for all.c Air pollution has been linked to lower education achievements(Clark-Reyna et al.(2015)Residential exposure to air toxics is linked to lower grade point averages among school children in El Paso,Texas,USA.Popul Environ,37(3),319-340.Available at:https:/pubmed.ncbi.nlm.nih.gov/27034529/).12The State of Global Air Quality Funding 20221.2 SCOPE OF THE ANALYSISThe report analyses funding between 2015 and 2021 to projects that tackle outdoor or“ambient”air pollution from two pools:international development funders and philanthropic foundations(see Table 1.1).d Each is considered separately in Chapter 2 and 3,respectively so as to better capture and understand specific trends in their air quality funding.As air pollution is a local as well as a public health issue,it is not surprising that the majority of“air quality funding”comes in the form of national and local government spending.EU27 governments,for example,together spent$17.6 billion on domestic pollution abatement in 2020.14 Domestic public air quality funding is a vital source of air quality finance but is beyond the scope of this report.Given the impact of air pollution on human and economic development,it should be a major development issue.Hence international development funders and philanthropic foundations represent key sources of funding for air quality interventions.TABLE 1.1.TYPES OF FUNDERS ANALYSED IN THE REPORT Type of funderDescriptionInternational development funders(Chapter 2)Multilateral development banks,bilateral development agencies and governments that provide international development funding in the form of development aid,concessional and non-concessional loans,as well as grants,for development purposes e.g.,air quality.This includes(i)official development assistance(ODA),(ii)other official flows(OOF);and(iii)flows from other public development funders that are not OECD-DAC members(e.g.,Islamic Development Bank).A share of the funding provided by these funders is directed to climate mitigation and adaptation projects contributing to the goals of the Paris Agreement;we refer to this share of international development funding as international public climate finance.e Philanthropic foundations(Chapter 3)Non-profit or charitable organisations that provide grants across a range of fields including air quality(referred to as philanthropic foundation funding in this report).These philanthropic foundations are funded by individuals,families,businesses or through public donations,and may be structured,governed and regulated in a variety of ways.d Due to incomplete data on international development funding,2021 figures are to be considered as preliminary and might change in future iterations of this analysis.e In this report,tracking international public climate finance is done with a different methodology from the analysis by the OECD on the progress of the$100 billion per year that developed countries should commit to assist developing countries to meet climate goals.Therefore,the two assessments are not directly comparable,although there may be certain overlaps in what they capture.For more details,please see Annex.13The State of Global Air Quality Funding 2022For the first time this year,we have cross-analysed data on air quality funding with data on climate finance provided by international development funders and philanthropic foundations.f This made it possible to analyse the portion of air quality funding deliberately and simultaneously addressing climate change,referred to in this report as“air quality&climate funding”.This year,we have expanded our analysis of international development funding that goes to“fossil fuel-prolonging”projects to capture flows between 2015 and 2021.This allows comparison with air quality funding over the same period.Such finance is likely to work against the clean air agenda by prolonging the use of dirty fuels and impacting negatively on public health.Table 1.2 describes in more detail,and provides examples of,the three funding flows covered in the analysis of international development funders in Chapter 2.TABLE 1.2.FUNDING FLOWS COVERED IN THE ANALYSIS OF INTERNATIONAL DEVELOPMENT FUNDERS Funding flowDefinitionProject exampleAir quality funding(Chapter 2.1)Finance committed to projects where improvements to outdoor air quality are explicitly included as a primary project objective,demonstrating intentionality.Air pollution prevention programmeAir quality&climate funding(Chapter 2.2)Finance committed to climate mitigation or adaptation projectsg where improvements to outdoor air quality are explicitly included as a primary objective.Reference to air quality needs to be included in the project description,demonstrating intentionality.This represents the subset of air quality funding flows which simultaneously addresses climate change.Bus rapid transit project to reduce urban air pollutionFossil fuel-prolonging funding(Chapter 2.3)Finance going to projects that may work against the clean air agenda by prolonging the use of polluting fossil fuels.Refinancing of a coal power plantFinally,given the rapid urbanisation occurring across Africa;the impact of the pandemic on worsening inequities;and in anticipation of COP27 in Egypt,the report provides a deep dive analysis into the state of air quality funding in Africa between 2015 and 2021 in Chapter 4.f Data on climate funding provided by international development funders came from Climate Policy Initiative(CPI)s Global Landscape of Climate Finance database,the most comprehensive information on global climate finance flows to climate mitigation and adaptation.g Climate mitigation aims at reducing emissions and enhancing sinks of greenhouse gases.Climate adaptation aims at reducing the vulnerability of,and maintaining and increasing the resilience of,human and ecological systems to negative climate change impacts.See Annex for further details.14The State of Global Air Quality Funding 20222.INTERNATIONAL DEVELOPMENT FUNDERSInternational development funders include multilateral development banks,bilateral development agencies and governments that provide finance to low-and middle-income countries for development purposes.They work across a variety of sectors,with topics including but not limited to agriculture,water,education,environment and health.International development funding is largely channelled through lending with some grant funding,depending upon the particular actor(see Table 1.1).In this section,we discuss:(i)air quality funding,(ii)air quality&climate funding,and(iii)fossil fuel-prolonging funding as previously defined in Table 1.2.The interlinkages between flows from international development funders are also depicted in Figure 2.1.FIGURE 2.1.INTERLINKAGES BETWEEN AIR QUALITY FUNDING,AIR QUALITY&CLIMATE FUNDING AND FOSSIL FUEL-PROLONGING INTERNATIONAL DEVELOPMENT FUNDING,2015-202015The State of Global Air Quality Funding 20222.1 AIR QUALITY FUNDINGAIR QUALITY FUNDING HAS DECLINED IN RECENT YEARS,REPRESENTING ONLY 0.5%OF TOTAL FLOWS BY INTERNATIONAL DEVELOPMENT FUNDERSAir quality a critical global health issue is still overlooked by key development funders.During 2015-2021,international development funders committed a total$10.9 billion to projects tackling air pollution(or roughly$1.5 billion per year).Even though air quality directly supports the achievement of many SDGs(see Box 1.1),and despite the link between air quality improvements and climate change,air quality funding accounts for only 0.5%of total commitments by international development funders.This totalled$1.9 trillion in 2015-2020(or$324 billion per year)(Figure 2.2).h In other words,for every$1,000 spent by a development funder,only$5 was spent to tackle ambient air pollution the fifth biggest killer by health risk factor worldwide.Not only are air quality funding commitments not enough to combat the scale of the problem,i they are declining.Between 2015 and 2021,flows have fluctuated significantly from year to year,peaking in 2019 due to a large commitment made for a railway extension project in the Philippines improving air quality by alleviating serious traffic congestion.In 2020,international development funders cut their commitments to air quality projects in half(Figure 2.2)and,based on preliminary data,the trend has continued in 2021.As yet,there is no clear,over-arching strategy from the donor community to tackle this global crisis.The drop in air quality funding from$3.5 billion in 2019 to$1.3 billion in 2020 is likely associated with the impacts caused by the COVID-19 pandemic and the reallocation of public resources.However,as government agendas worldwide have recentred around public health following the pandemic,there is an opportunity for development funders to build on this momentum and scale-up their funding for air quality.This is particularly relevant given the established links between respiratory illness and vulnerability to COVID-19 or related diseases.h Due to limited data on some international development funding flows(e.g.global south-south flows),this total is likely to be an underestimation.This covers the period 2015-2020 and data for 2021 total international development funding is not yet availablei Given the observed reality that 99%of the global population breathes air in excess of WHO PM2.5 standards“For every$1,000 spent by a development funder,only$5 was spent to tackle ambient air pollution the fifth biggest killer by health risk factor worldwide”16The State of Global Air Quality Funding 2022FIGURE 2.2.AIR QUALITY FUNDING AS A SHARE OF TOTAL INTERNATIONAL DEVELOPMENT COMMITMENTS,2015-2020 The clean air agenda is failing to garner the political momentum it deserves and needs.There is growing consensus among stakeholders that the international funding response for pollution prevention has been meagre.15 This scarce funding and inconsistency in commitments indicated above reflects low international prioritisation of the issue.There is also opportunity for greater collaboration and coordination amongst international funders to,together,prioritise air quality funding and tackle several interlinked development issues simultaneously.Avoidable deaths attributable to outdoor air pollution continue to increase sharply,particularly in aid-eligible countries(Figure 2.3).90%of annual deaths from outdoor air pollution-over 4 million-are in aid-eligible countries.This represents a 153%increase between 1990 and 2019,largely stemming from population growth.Air quality commitments to these countries must be urgently scaled-up to be consistent with the scale of the global air quality emergency.FIGURE 2.3.ANNUAL DEATHS ATTRIBUTABLE TO AMBIENT AIR POLLUTION IN AID-ELIGIBLE AND OTHER COUNTRIES,1990-2019Source:HEI SOGA(2021)1617The State of Global Air Quality Funding 2022“90%of annual deaths from outdoor air pollution-over 4 million-are in aid-eligible countries.”18The State of Global Air Quality Funding 2022AIR QUALITY FUNDING WAS CONCENTRATED IN A HANDFUL OF ASIAN COUNTRIES,AND LAGS BEHIND IN AFRICA AND LATIN AMERICA Between 2015 and 2021,88%of air quality funding provided by international development funders was concentrated in five countries in Asia:China(42%),the Philippines(26%),Bangladesh(12%),Mongolia(6%)and Pakistan(4%)(Figure 2.4).This is largely because the top four funders(i.e.,Japan,Asian Development Bank,Asian Infrastructure Investment Bank,and the Republic of Korea)-which account for 45%of total air quality funding have a regional focus on Asia.Regions such as Africa and Latin America receive significantly lower funding,accounting for only 3.7%and 0.3%of the total during the same period.FIGURE 2.4.INTERNATIONAL DEVELOPMENT FUNDING TO AIR QUALITY BY REGION OF DESTINATION,2015-2021According to the Health Effects Institutes State of Global Air 2021 data,the countries that perform worst in terms of(absolute)number of air pollution-related deaths are China and India,at 1.5 million and 1.1 million deaths,respectively,in 2019.17 While China consistently receives substantial air quality finance(42%of the total tracked),Indias share is far lower(at 2%).18 Given Indias dire air quality and its position as a large recipient of international development finance(averaging 5%of all flows each year between 2015-2020),there is certainly scope for scaling-up clean air finance by ensuring the clean air agenda is an integral component of development interventions in the country.“88%of air quality funding is concentrated in just five countries in Asia.”DHAKA:SPOTLIGHTING URBAN AIR QUALITYAccording to the 2021 World Air Quality Report ranking,Bangladeshs capital is the second most polluted capital city in the world,averaging an annual PM2.5 concentration of 78.1 g/m(just below Delhi,India,at 85 g/m).In light of the WHOs Air Quality annual average limit of 5 g/m PM2.5,Dhaka is currently experiencing air pollution over 15 times the level considered safe.The main sources of particulate matter in Dhaka are wood burning,soil and road dust,brick kilns and motor vehicles(Dhaka Mass Transit Company,2021).In the six years between 2015 and 2021,international development funders committed$1.3 billion in air quality projects within and for the city.Funding was provided by JICA over three years(2018-2020)to develop a Mass Rapid Transit system to alleviate traffic congestion and mitigate air pollution.A recent Environmental Impact Assessment undertaken by the projects Executing Agency the Dhaka Mass Transit Company showed that concentrations of particulate matter between 2017(baseline year)and 2020 had indeed been reduced at 5 out of the 6 monitoring locations along the track.Although Dhaka received 11%of total air quality development funding from international development funders in 2015-2021,as the worlds second most polluted capital city,current levels of international development funding are simply not consistent with the level needed to achieve substantial reductions in,and safe levels of,PM2.5.While there are several rankings of cities with the worst air pollution,a recent study found that the widespread lack of monitoring data prevents a clear understanding of the topic.As the authors argue,“the city with the highest PM2.5 concentration may be unmonitored”.Bangladesh,for example,was found to have less than 0.2 PM2.5 monitors per million people,with distances between populations and monitor locations too large for accurate and meaningful exposure assessment.19Much more funding is needed for monitoring equipment(e.g.,regulatory networks,monitors,satellite remote sensing)to help assess the scale of the problem in particular geographic contexts whether those be local,regional or national and to take action.Accurate air quality data is essential for effective air quality management.19The State of Global Air Quality Funding 202220The State of Global Air Quality Funding 2022GRANT FUNDING,MUCH NEEDED IN LOW-INCOME COUNTRIES,REPRESENTED ONLY 6%OF TOTAL AIR QUALITY COMMITMENTSMultilateral development financial institutions(DFIs)provided the largest share(49%)of air quality funding in 2015-2021,followed by bilateral DFIs(39%).These funders provided funding almost exclusively in the form of loans,which represented 92%of total commitments(Figure 2.5).Grant funding,which made up only 6%of total air quality funding,was mainly provided by governments.Grants provide access to affordable capital for early stage projects and are especially important in low-income countries to lower the overall cost of funding,mitigate risks,and attract further investments.However,the amount of grant funding provided to low-and middle-income countries has reduced at a time when these countries need grant funding the most faced with rising inflation following the pandemic and compounded by the energy and food crises related to the war in Ukraine.FIGURE 2.5.INTERNATIONAL DEVELOPMENT FUNDING ON AIR QUALITY BY INSTRUMENT AND TYPE OF FUNDER,2015-2021There is still only a limited pool of funders providing air quality funding,leaving room for new investors to enter this space.In addition,the funding they provide is often on an ad hoc and uncoordinated basis.Reporting on development funding with air quality benefits remains both limited and unevenly distributed.Table 2.1 shows the top 10 international development funders,representing 98%of air quality funding in 2019-2020.Among these,only four provided funding in the form of grants.21The State of Global Air Quality Funding 2022TABLE 2.1.TOP 10 INTERNATIONAL DEVELOPMENT FUNDERS OF AIR QUALITY FUNDING IN 2019-2020RankingInternational development funderAir quality funding(average 2019-2020,USD million)Grant%of air quality funding(average 2019-2020)%of air quality funding also targeting climate(average 2019-2020)1Japan 1,00800*sian Development Bank6690S:sian Infrastructure Investment Bank2500%0%4Republic of Korea 2011%5World Bank-International Bank for Reconstruction and Development1000%0%6Germany57100%7|lean Technology Fund160%0uropean Bank for Reconstruction and Development140A%9United States14100European Commission11100%All top 10 funders2,3404gThe State of Global Air Quality Funding 2022In a similar way that international climate finance tends to be framed in terms of the responsibility of developed countries to assist developing countries to mitigate and adapt to climate change,air quality finance can also be seen as a social justice issue.A recent study found that international trade“shifted”more than 700,000 pollution-related deaths from regions that import goods and services,like the United States and Western Europe,to those that produce them,including,for example,China.20 There are strong grounds,then,for development funders to increase the share of grant funding to air quality,to address this inequitable dynamic.International development funders are also strategically positioned to provide funding in a way that helps to catalyse private investment into the clean air space.This can be done by using blended finance instruments that reward outcomes,de-risk projects,and otherwise crowd in or leverage other streams of finance such as the Breathe Better Bond structure described in Box 2.1.“Grant funding is especially important in low-income countries to lower the overall cost of tackling air pollution.”23The State of Global Air Quality Funding 2022BOX 2.6:“SMARTER”AIR QUALITY FUNDING BREATHE BETTER BOND INITIATIVE The Breathe Better Bond Initiative,developed by the International Finance Corporation(IFC)under the Global Innovation Lab for Climate Finance(the Lab),is an innovative financing structure aimed at raising financing for projects that reduce both air pollution and greenhouse gas emissions in cities.It combines(i)a bond issued by a city or state;(ii)a results-based payment agreement involving a donor,philanthropic institution,or DFI to lower the total cost of financing;and(iii)technical assistance for cities in order to help them identify sources of air pollution,project pipeline preparation,and improve enabling conditions.The structure of the Initiative is further depicted in Figure 2.6.If implemented in the ten emerging-market cities with the most potential,j IFC estimates that the Initiative could mobilise$4 billion for climate-friendly urban infrastructure projects that simultaneously tackle air pollution.FIGURE 2.6.DESIGN OF THE BREATHE BETTER BOND INITIATIVESource:The Lab(2022)21j Ahmedabad;Bengaluru;Bogota;Delhi;Jakarta;Johannesburg;Lagos;Lima;Mexico City;Santiago.CHINA:TURNING THE TIDE ON AIR POLLUTION WITH THE SUPPORT OF ADB FINANCEAs a result of rapid industrialisation and urbanisation,China became one of the most polluted countries in the world.In 2013,a study found that Beijings PM2.5 concentration was seven times the amount considered safe by the WHO,and double the countrys own“Class 2”national standard.The dire state of air quality led the government to declare a“war against pollution”,stressing that the country could not allow itself to“pollute now and clean up later”.22 As part of concrete policy initiatives,China tasked the Beijing-Tianjin-Hebei(BTH)region,one of the most polluted regions,and home to much of the countrys coal and steel industries,with a target to reduce annual PM2.5 by 25%by 2017.The Asian Development Bank(ADB)s multi-year project(20152023),Air Quality Improvement in the BTH Region,has helped to deliver on the regional policy target.An initial$300 million loan targeted policy and regulatory reform in Hebei province;a second$500 million loan aimed at facilitating access to finance for small-and-medium-sized enterprises;and the third,most recent$500 million loan provided for an emissions-reduction and pollution-control facility.23Refining policy infrastructure.Given the nature of air pollution,transboundary policies must be designed that consider geographical centres and peripheries as one integrated landscape.24 At the outset of the“war against pollution”Chinas regulatory environment was instead fostering a patchwork of separate,locally based pollution control regimes.The Air Quality Improvement project established the necessary institutional arrangements and cooperation strategies for effectively managing a transboundary problem.Demonstrating and deploying new technologies.The pollution-control facility was designed to demonstrate the feasibility of technologies for heavy-emissions industries and enterprises.An industry-specific fund was provided for sub-projects within the iron and steel industries,as well as capacity building to use these advanced technologies and select appropriate business models.Catalysing finance.ADBs investment is expected to attract approximately$1.5 billion in co-financing from other public and private actors,with the aim of training at least 200 people in the use of advanced technologies by 2023.25 Development finance institutions can play a key role in establishing the market for,and de-risking,pollution-reducing technologies and enterprises.Improving public health.Progress has already been observed in the BTH region:since 2013 there has been a 49%reduction in particulate pollution,translating to a gain of 4.1 years in life expectancy.2624The State of Global Air Quality Funding 202225The State of Global Air Quality Funding 20222.2 AIR QUALITY AND CLIMATE FUNDINGOur climate,air pollution and health challenges are interconnected in their causes and consequences,and therefore also in their solutions.Despite this,action is often handled separately,with siloed air quality and climate policies potentially leading to both damaging trade-offs and missed opportunities.However,coordinated,intentional action can be a win-win in tackling climate change and air pollution together.Therefore,we have analysed air quality funding to investigate the extent of joined-up air quality and climate action in funder programming.IN 2015-2020,72%OF AIR QUALITY FUNDING($7.6 BILLION)WENT TO PROJECTS WHICH SIMULTANEOUSLY ADDRESSED CLIMATE CHANGEBetween 2015 and 2020,k international development funders committed 72%of their air quality funding($7.6 billion)to projects which simultaneously tackled air pollution and climate change.We refer to these flows as“air quality&climate funding”(see Table 1.2).The remaining 28%of funding($3 billion)went to air quality-specific projects not related to climate,for example funding for research studies on the impacts of air pollution on health or for air quality monitoring network in a city.Annual air quality&climate funding commitments from these funders were not consistent,with considerable annual fluctuations due to few large commitments made by bilateral and multilateral development finance institutions(DFIs).In 2020,the share of air quality&climate funding within total air quality funding dropped to an all-time low(23%),likely due to the reprioritisation of development funding in times of COVID-19(Figure 2.7).k Given data on climate finance for 2021 is not available,this section compares finance flows for 2015 2020.26The State of Global Air Quality Funding 2022FIGURE 2.7.SHARE OF INTERNATIONAL DEVELOPMENT FUNDING AIR QUALITY&CLIMATE FUNDING AS A SHARE OF TOTAL AIR QUALITY FUNDING,2015-2020The number of international development funders explicitly reporting on and capturing the interlinkages between air quality and climate action remains limited.Since 2015,95%of total air quality&climate funding was provided by five international development funders,namely Japan International Cooperation Agency(JICA,49%),Asian Development Bank(ADB,29%),the International Bank for Reconstruction and Development(IBRD,10%),the Export-Import Bank of Korea(KEXIM,5%)and Kreditanstalt Fuer Wiederaufbau(KFW,2%).In addition to limited funding,there is limited information and reporting on intentional targeting of climate and air quality as development objectives.So it is likely that these figures do not capture all investment and the actual figures may be higher.Given their key role and development-linked mandates,more international development funders must recognise the links between air pollution and climate change and scale up their commitments to projects jointly addressing the root causes of both issues.27The State of Global Air Quality Funding 2022MOST AIR QUALITY&CLIMATE FUNDING(95%)WENT TO MITIGATION PROJECTS IN THE TRANSPORT AND ENERGY SECTORSAlmost all(98%)of the$7.6 billion committed as air quality&climate funding was directed to climate mitigation projects(Figure 2.8).Funding to adaptation projects and projects with dual benefitsl remained low,attracting a total of$154 million during 2015-2020.These projects include,for example,capacity building programmes jointly tackling issues associated with food security,deforestation and air pollution in developing countries.Such low levels of funding highlight that the potential to link climate adaptation and air quality improvements remains largely untapped.Over half of air quality&climate funding(56%,or$4.2 billion)targeted transport-sector projects aimed at reducing air pollution,primarily for the development of rail and public transportation systems which have a clear and immediate impact on air pollution in urban contexts.Particularly,air quality&climate funding to transport projects grew exponentially in 2018 and 2019 thanks to three large investments made by JICA in Bangladesh and the Philippines where motor vehicles are a large source of air pollution.m Energy projects(mainly for renewable power and heat generation)attracted 21%of total air quality&climate funding($1.6 billion)(Figure 2.8).These shares are reflective of the impact that transport and energy can have on both air quality and climate.FIGURE 2.8.PROPORTION OF AIR QUALITY AND CLIMATE FUNDING BY CLIMATE OBJECTIVE AND SECTOR,2015-2020l Dual benefits projects include activities contributing to both climate change mitigation and climate change adaptation.For example,an afforestation project preventing slope erosion is a“dual benefit”project because it brings significant adaptation benefits,while also making a positive contribution to mitigation.m These were the development of the Dhaka mass rapid transit system($1.3 billion),the construction of the Manila metro line($930 million),and the extension of the North-South Commuter Railway in the Philippines($1.5 billion).28The State of Global Air Quality Funding 2022ONLY 2.2%OF INTERNATIONAL CLIMATE FINANCE EXPLICITLY TACKLES AIR POLLUTION Alongside air quality commitments,international development funders provide billions of finance each year to climate mitigation and adaptation projects in developing and emerging countries.n These commitments have grown over time reaching a total of$342 billion over 2015-2020(or$57 billion per year),a reflection of the growing recognition of the importance of tackling climate change and building resilience in these countries.Yet,this is not nearly enough to ensure the achievement of international climate goals and must be urgently scaled up.In the same period,air quality&climate funding($7.6 billion)accounted for only 2.2%of total international public climate finance from funders in developed countries to developing and emerging markets(Figure 2.9).This means that 98%of these climate finance flows had no explicit air quality objectives,despite the clear links between improving air quality and climate action.This share has remained more or less stable throughout the period though it dropped to 0.4%in 2020 showing how international funders have so far failed to consistently tackle air pollution and climate change together.n Due to data limitations,an OECD vs non-OECD country distinction is used here as an imperfect proxy to separate developed countries from developing and emerging countries.It should be noted,however,that under the UNFCCC,OECD countries such as Mexico,Colombia,Costa Rica and Chile are classified as“non-Annex I”or developing countries.Similarly,Turkey,while categorized as an“Annex I”country(or developed),is an ODA-eligible country.“98%of climate finance flows have no explicit air quality objectives”29The State of Global Air Quality Funding 2022FIGURE 2.9.AIR QUALITY AND CLIMATE FUNDING AS A SHARE OF TOTAL INTERNATIONAL PUBLIC CLIMATE FINANCE,2015-2020o o International climate finance include funding from OECD to non-OECD countries as reported in Global Landscape of Climate Finance reports in 2015-2020.30The State of Global Air Quality Funding 2022A much larger amount of climate finance is likely having impacts on air quality which are currently not accounted for.For example,during 2015-2020,international development funders committed an additional$11.6 billion to climate finance projects which also had direct air quality benefits,even though air quality was not explicitly recognised as a funding priority.The majority of these flows(79%or$9.2 billion)included funding for transport-related projects which favour a modal shift away from fossil fuel vehicles.p The reverse is also true.Some climate mitigation solutions,such as biomass burning in stoves and vehicles,can lead to an increase in air pollution.By taking an integrated approach,international development funders can ensure that projects are designed around both priorities and avoid harmful consequences.If funders account for the health and economic benefits gained from improved air quality in their programming,their investment becomes better value for money with increased impact.If impacts on air quality are not considered at the design phase,climate projects that might actually be net-benefit might still appear as net-cost,and potentially not go ahead.It can also lead to more climate action because air quality benefits can be quick wins and build public support for further steps.p As these projects would reduce air pollution by offering an alternative to fossil fuel burning,they are considered to have a direct positive impact on air quality,even though unintentional and implicit.CHILE:JOINING-UP ACTION ON AIR QUALITY AND CLIMATE Chile is particularly vulnerable to climate change and is already experiencing its impacts,most notably through an ongoing drought since 2010 in the central and southern part of the country.27 Chile is also home to 11 of the top 15 most polluted cities in Latin America and the Caribbean with air pollution costing the Chilean health sector approximately$670 million every year,associated with 4,000 premature deaths.28 Despite this,Chile did not receive any air quality funding from international development funders during 2015-2021.In April 2020,Chile submitted their revised Nationally Determined Contribution(NDC)to the UNFCCC,outlining their strategies for tackling climate change.One component of the NDC committed the country to reducing black carbon emissions by 25%by 2030,relative to 2016 levels.Black carbon is a component of PM2.5 that directly contributes to atmospheric warming as well as being a dangerous air pollutant.Hence,Chiles decision to integrate black carbon reduction targets into its NDC is an important step towards joined-up action on air quality and climate,linking international climate policy processes with local air quality concerns.As black carbon in Chile mainly comes from burning firewood for heating and residential cooking,biomass-based power generation,off-road machinery and diesel vehicles,actions proposed to deliver on this target include switching to electric heating,energy efficiency improvements,industry emissions standards,as well as more stringent transport regulations.29Alongside other countries that have adopted similar black carbon targets within their NDCs,Chile has set an example of how joined-up action may be operationalized,using and enhancing the existing policy infrastructure established for tackling climate change to achieve broader social and economic gains.Moreover,integrating immediate,local air pollution concerns that have tangible implications for individuals into longer-term climate strategies helps to increase buy-in on NDCs,allowing benefits to be realized today rather than sometime in a distant future.Capitalising on the shorter time frame for delivering air quality outcomes and,thereby,delivering on longer-term climate goals that span multiple political cycles,is a key opportunity joined-up action offers to policy makers.31The State of Global Air Quality Funding 202232The State of Global Air Quality Funding 20222.3 FOSSIL FUEL-PROLONGING FUNDINGFunding committed to fossil-fuel prolonging projects will work against the clean air agenda in the long term by prolonging the use of,and exposure to,dirty fuels with regressive implications for public health.The Global Burden of Disease study found that burning fossil fuels(coal,oil and natural gas)contributed to an estimated one million deaths globally in 2017,or 27.3%of all mortality.Most of these deaths(80%)were concentrated in the Global South.30 These avoidable deaths lend even more impetus to the COP agenda to phase-out coal,emphasising the need to re-direct current development spending that prolongs the use of fossil fuels towards cleaner alternatives that can ensure healthy people and a healthy planet alike.FOSSIL FUEL-PROLONGING PROJECTS RECEIVED OVER FOUR TIMES MORE DEVELOPMENT FUNDING THAN CLEAN AIR PROJECTS Between 2015 and 2021,official development funders committed$46.6 billion to projects that prolonged the use of fossil fuels,over four times the amount committed to air quality projects in the same period($11 billion)(Figure 2.10).This jeopardises both the clean air agenda and global climate goals,with profound consequences for worsening health outcomes.Overall,fossil fuel-prolonging funding was distributed more evenly compared to air quality funding,with South Asia as the top recipient(31%)followed by a balanced breakdown between Middle East and North Africa(22%)and Central Asia&Eastern Europe(20%).Most funding for fossil fuel-prolonging was channelled towards oil and gas extraction/production(64%),followed by natural gas(16%).With the latter,most investments were for natural gas power plants while the former included investment into refining and processing crude resources,as well as planning,technical assistance and capacity building to facilitate sector development.International development funders must strike a balance between spurring economic growth in countries with large energy access gaps and minimising the financial and societal costs of locking-in fossil-fuel infrastructure(see Section 4.1).On a positive note,however,international development funders began to move away from coal in recent years,with coal funding declining 95tween 2019 and 2020.The decline in total fossil fuel-prolonging funding seen between 2019 and 2021 also suggests broader moves towards less polluting energy sources.This reflects the increased political momentum from bodies like the G7 in recent years to stop international funding for fossil fuels.31 However,the data for 2021 is preliminary,as a result a concrete trend cannot be determined without additional years of data.“Between 2015 and 2021,international development funders committed$46.6 billion to projects that prolonged the use of fossil fuels,over four times higher the amount committed to air quality projects in the same period($11 billion).”33The State of Global Air Quality Funding 202234The State of Global Air Quality Funding 2022FIGURE 2.10.ANNUAL INTERNATIONAL DEVELOPMENT FUNDING TO AIR QUALITY AND FOSSIL FUEL-PROLONGING PROJECTS BY SECTOR,2015-2021Today,international development funders are still funding fossil fuel solutions as a way to improve air quality.These projects,which received$1.2 billion in funding between 2015 and 2020,include,for example,the construction of new gas-fired power plants to replace coal.While gas reduces primary particulate matter emissions relative to other fossil fuels,the production and use of gas continues to contribute to secondary particulate matter formation as well as ground level ozone in addition to any impacts on water pollution from extraction.In these instances,international development funders have opted for solutions reducing air pollution and greenhouse gas emission in the short-term but locking-in fossil fuels in the long-term,rather than replacing fossil fuels with cleaner alternatives(e.g.,renewable energy).PERSPECTIVES FROM PHILANTHROPIC FUNDERSWHY IS IT IMPORTANT TO INVEST IN AIR QUALITY PROGRAMMING?“We know that air pollution damages human and planetary health.Sadly,children are especially vulnerable to the effects of toxic air and the devastating impacts of climate change.We encourage others to join us and make air quality a priority.Investing in clean air will improve childrens health and supports climate action to protect their futures.”Childrens Investment Foundation Fund“Poor air quality is the largest environmental risk to our health,both in South London where we work,and globally.But poor air quality is a solvable issue.We know with more investment we can make tangible improvements to air quality and improve public health.”Impact on Urban Health“Healthy air is the most equitable form of social welfare,supporting disadvantaged communities,developing countries,and aging societies.Air policies also cut greenhouse gas emissions and advance sustainable development.To do that,we need health-based air quality standards,strategies to control both air pollutants and greenhouse gas emissions,sector mitigation pathways and comprehensive collaboration across disciplines and internationally.”Energy Foundation China“The air pollution problem is far from being solved.Millions still die prematurely and morbidity cases are even larger.We all know that many of the sources that produce carbon dioxide and black carbon also emit pollutants like carbon monoxide,nitrogen oxides and volatile organic compounds that are harmful for peoples health.In many developing countries and large emerging economies,tackling air pollution can be a perfect way to get national governments to accelerate climate action.”Iniciativa Climatica de Mexico35The State of Global Air Quality Funding 2022WHY SHOULD OTHER FUNDERS CONSIDER WORKING ON AIR POLLUTION?“Air pollution is an underfunded,important global public health issue which offers many tractable opportunities for improving the lives of hundreds of millions of people.Many countries have successfully achieved substantial reductions in air pollution levels.Scientific understanding of air pollution,including its sources and health impacts,has improved substantially.Innovations in monitoring and modelling the transport of pollutants have dramatically improved measurement and analysis.Together,these enable policy action today to be more cost-effective and better designed.”Open Philanthropy36The State of Global Air Quality Funding 2022“Air pollution is a clear and urgent danger to public health,especially affecting the lives of children.The causes of climate change and air pollution are often the same:industrial emissions,transport and the power sector.By capitalizing on growing public and political awareness of the health impacts of air pollution,we can simultaneously accelerate climate action and improve public health.”Childrens Investment Foundation Fund“Air pollution is a strategic issue because it is the meeting point of several political and social problems:children,health,environment,climate,development,urban planning and green areas.Financing initiatives on the subject is to contribute to the solution of all these problems.”Alana Institute“Financing air quality is financing a cross-cutting issue that connects multiple agendas:from replacing fossil fuels with renewable energy through a just transition,to supporting sustainable agriculture and forestry to avoid deforestation and fires in biomes such as Amazon.Therefore,working on air quality is a powerful way to discuss economy decarbonization.”Instituto Clima e Sociedade“Air pollution is a public health crisis and a social justice issue those who are most affected often contribute the least to the problem.The co-benefits of improving air quality are massive;from making physical activity in cities easier by improving active travel infrastructure,to helping businesses reduce their air quality emissions and contributing to mitigate the climate crisis.There are a lot of win-wins.”Impact on Urban Health 37The State of Global Air Quality Funding 20223.PHILANTHROPIC FOUNDATIONSThis section focuses on philanthropic foundation funding to air quality between 2015 and 2021.While this funding remains low especially compared to international development funding to air quality foundations play a key role in introducing innovative approaches,advocacy and in influencing key stakeholders.SPENDING ON AIR POLLUTION IS RISING BUT REMAINS LESS THAN 0.1%OF TOTAL FOUNDATION FUNDINGIn 2021,total air quality foundation funding rose by 36%to an all-time high of$63.8 million(Figure 3.1).Despite the continuous growth in funding over the past six years,foundations still allocate a small proportion of their funding to combatting air pollution.32 In 2020,for every$1000 granted by philanthropic foundations,less than$1 went to combatting ambient air pollution.Foundations are therefore committing a lower proportion of their total funding to air pollution compared to that of international development funders(0.5%in 2015-2020).The number of foundations we identified as providing grants to air quality projects doubled between 2015 and 2021(from 23 to 47),suggesting a growing awareness of the issue.At the same time,there seems to be an increasingly large pool of funding opportunities available to tackle air pollution,as the number of grantees has continued to increase,reaching an all-time high of 295 in 2021(Figure 3.1).With tracked foundation funding continuing to grow year-on-year,the air quality field has shown it is able to absorb more and more funding,with expert organisations poised to produce transformative results if they receive the support they need.38The State of Global Air Quality Funding 2022FIGURE 3.1.ANNUAL FOUNDATION FUNDING TO AIR QUALITY,NUMBER OF FOUNDATION FUNDERS AND NUMBER OF GRANTEES,2015-2021“For every$1,000 granted by philanthropic foundations,less than$1 went to combatting ambient air pollution.”39The State of Global Air Quality Funding 2022FOUNDATIONS ARE INCREASINGLY MAKING BIG BETS ON LARGE-SCALE AIR QUALITY PROJECTS THAT DEPLOY MULTIPLE INTERVENTIONS SIMULTANEOUSLYEffective action on air pollution requires funding across all project types(defined in Box 3.1).Funding to projects categorised as multiple/undefined accounted for the largest proportion of funding for the first time in 2021,totalling over$18 million(Figure 3.2).This represents a 149%increase since 2020,and is in part due to a small number of large grants(above$5 million)committed in 2021.These large grants account for a significant proportion of the jump in funding between 2020 and 2021,and contributed to a doubling of average grant size in 2021.Such funding supports large-scale projects that deploy multiple strategies simultaneously:generating data,assessing impacts,raising awareness,affecting policy and implementing solutions.Funding for this type and scale of projects was previously only provided by international development funders.The change suggests increased levels of commitment from some foundations and illustrates the ability of air quality grantees to coordinate complex pieces of work across multiple strategies and stakeholders.The large step up of multiple/undefined funding is also consistent with a broader shift in foundation grantmaking practices,orienting towards big bets on structural solutions to complex problems.33 Major funding commitments,such as the Bezos Earth Fund committing$10 billion to fighting climate change this decade,are likely to lead to more large-scale,multi-disciplinary,foundation-funded projects moving forward.Nonetheless,foundation funding continues to play a vital role in supporting work in the different project types.In 2021,funding to communications&awareness and policy&politics projects increased by 22%and 38%,respectively(Figure 3.3).Foundations play a pivotal role in supporting a variety of project types that fall beyond the scope and mandate of international development funding(for example,campaigning to raise awareness of the issue).BOX 3.1.AIR QUALITY PROJECT TYPES FOR FOUNDATIONSData:To improve the quantity,availability,transparency,accuracy or accessibility of air quality information and data.Impacts&Research:To increase research into and understanding of the impact of air pollution on health,the environment and the economy.Communications&Awareness:To raise awareness of air pollution,including campaigning,communications and events.Policy&Politics:To develop,promote,and transform public policies on air quality.Implementation:To invest in implementing infrastructure to improve air quality.Multiple/Undefined:To support core costs of an organisation focused on air quality(including field building),where multiple strategies were supported,or where it was not possible to assign an activity type.40The State of Global Air Quality Funding 2022FIGURE 3.2.ANNUAL FOUNDATION FUNDING BY PROJECT TYPE,2015-2021COUNTRIES IN AFRICA AND ASIA CONTINUE TO RECEIVE THE LEAST FUNDING DESPITE HAVING THE GREATEST POTENTIAL GAINSIn 2021,philanthropic foundation funding to air quality continued to primarily target China,India and countries in Europe and North America(Figure 3.3).During 2015-2021 these countries have cumulatively attracted 83%of total funding,while global projects have made up an additional 13%.In 2021,funding to air quality projects in India and North America more than doubled,mainly due to the small number of large grants mentioned above.Air quality funding continues to lag in Africa,Asia(excluding India and China)and Latin America.With a combined population of 3.9 billion people,these three regions account for half of the global population in 2021.Yet,they only received a combined 3.7%of total foundation funding to air quality in the same year.“Africa,Asia(excluding India and China)and Latin America only received a combined 3.7%of total foundation funding to air quality in 2021.”41The State of Global Air Quality Funding 2022These three regions are also home to eight out of the ten countries most affected by air pollution.q These are the countries that would benefit the most from air pollution policies and funding.Improving air quality to meet WHOs guideline for PM2.5 in these countries,would increase the average life expectancy by more than an estimated 2.5 years.Despite this,out of these ten countries,funding almost exclusively targeted India and China between 2015 and 2021,with Nepal receiving less than 0.2%of the funding to this group and the remaining seven countries receiving no funding.r FIGURE 3.3.ANNUAL FOUNDATION FUNDING BY REGION,2015-2021The low level of funding to air quality projects in Africa and Latin America are not consistent with wider foundation funding trends which see Sub-Saharan Africa and Latin America receive some of the largest flows of funding.34 This suggests a lack of awareness of the size of the air pollution problem,or that the small share of total foundation funding targeting air quality limits its overall geographic reach.The Air Quality Life Index(AQLI)35 shows that the countries that have the highest concentrations of air pollution are also those most likely to benefit from air pollution policy and action(Figure 3.4).The ten countries most likely to benefit would see average life expectancy increase by more than 2.5 years if the World Health Organizations guideline for PM2.5 were met.However,seven out of ten of these countries saw no foundation funding between 2015 and 2021.q The ten countries are Bangladesh,India,Nepal,Pakistan,Democratic Republic of the Congo,Rwanda,Myanmar,Burundi,China and Mongolia(AQLI(2022)Air Quality Life Index.Available at:https:/aqli.epic.uchicago.edu/the-index/).r In this instance we have only considered foundation funding with only one recipient country.Funding to these countries may be captured under global and regional flows.42The State of Global Air Quality Funding 2022FIGURE 3.4.GAIN IN LIFE EXPECTANCY IF WHO PM2.5 GUIDELINE IS MET VS.FOUNDATION FUNDING ON AIR QUALITY BY COUNTRY,2021Source:Air Quality Life Index(2020)The OECDs work on Private Philanthropy for Development36 highlights the growing role of domestic philanthropies in emerging markets,with 19%of total philanthropic foundation funding flows for development provided by domestic foundations over the period 2016-2019.In countries such as India,China and Mexico,domestic foundations provided more funding than international ones.A similar trend is evident for air quality foundation funding in China,Mexico and Brazil,where domestic foundations have grown in recent years,providing more than 50%of foundation finance granted to those countries in 2021.STRENGTHENING AIR QUALITY LEGISLATION IN BRAZIL INSTITUTO CLIMA E SOCIEDADEIn Brazil in 2018,a bill was proposed for a National Air Quality Policy.This suggested that clean air was moving up the governments agenda,but the initial bill did not go far enough.Instituto Clima e Sociedade funded Instituto Sade e Sustentabilidade(ISS)to mobilise a coalition of academics,civil society and industry to help strengthen the legislation and raise public awareness of air pollution.Shaping Brazils air quality agendaISS led a coalition including institutions such as Alana,International Council on Clean Transportation,and The Institute for Energy and the Environment to work with the congress of deputies to strengthen the bill.The coalition established a dialogue with deputies,building consensus along the way as the bill progressed through the committees.The National Policy for Air Quality Act,which was finally approved in July of 2022,will fill existing gaps in air quality regulations,establish clear responsibilities for air quality management and specifies the need to tackle air pollution and climate change together.While the bill made its way through the committees,the coalition pushed clean air up the public agenda.Through debates and public hearings with experts,the coalition were able to highlight the need for the national monitoring network,for more emissions restrictions and targets aligned with the World Health Organizations guidelines.The power of collaborationThe success of the coalition approach among industry,civil society,and academics shows the capacity of civil society to coordinate the field and create momentum to shift the dial on air quality.It also highlights how impactful it is to use the different expertise of institutions,bringing them together to create long lasting legislative and policy change to improve peoples health and the environment.The clean air sector can now use this momentum to build on the success of the bill and ensure effective implementation pollution reduction.43The State of Global Air Quality Funding 202244The State of Global Air Quality Funding 2022FIGURE 3.5.ANNUAL DIRECT AND REGRANTED FOUNDATION FUNDINGs BY FOCUS AREA,t 2015-2021s To analyse the engagement of funders with these focus areas,we have included funding flowing both directly(to implementors)and regranted(to other foundations)in the following analysis.Elsewhere the analysis is limited to direct funding flows in order to avoid double counting.t Foundations can have multiple focus areas.As a result,the combined percentage of specific focus area funding can exceed 100%.Foundation focus areas are determined via desk-based research based on foundations programmes of work and by information provided by funders themselves.Foundations with a climate,environment or energy(CEE)focus continued to provide the majority of air quality funding in 2021(88%of the total).The sharp rise in funding from CEE foundations between 2020 and 2021 follows the overall foundation funding trend,illustrating that the large grants mentioned above combine ambitions to improve ambient air quality with workstreams on climate change and/or the environment.In 2021,funding from foundations with a social justice focus area contributed to 65%of funding,followed by foundations with focus areas of health(34%),children(22%),and cities and mobility(11%)(Figure 3.5).The largest year-on-year rise in funding was from foundations with a social justice focus area,growing 106%(see the Social Justice Spotlight).Only 11%of funding was from foundations with an air quality focus area.While this figure has grown from virtually 0%in the last few years,there are still only a few foundations with a specialised programme on air quality itself.Considering the scale and complexity of the problem,more air quality-specific programmes and therefore funding are needed to supplement funding to the issue from other programme areas and push for concerted action.The Lancet Commission on health and pollution highlights that prevention is best achieved by identifying and quantifying air pollution sources and then deploying data-driven control strategies based on law,policy,technology and enforcement that target those sources.37 To achieve this,foundations need to work on making the case for air quality programmes and projects in their own right as well as drawing the links to other focus areas.AIR QUALITY WORK IS RECEIVING FUNDING FROM AN INCREASINGLY DIVERSE ARRAY OF FOUNDATIONS45The State of Global Air Quality Funding 2022Funding from foundations with a health focus also rose sharply between 2020 and 2021,increasing by 46%from$23 million to$33 million.While this represents substantial progress,this level of funding still does not match the scale of the health problem posed by air pollution.In addition,93%of this funding is from foundations that work on both CEE and health just$2 million was spent in 2021 by health funders not working on climate or the environment.Billions of dollars are granted out by foundations across health topics each year and a significant shift in perspectives on air quality is still needed to fully leverage this pool of funding.Some large grants to indoor air quality reported from health foundationsu may suggest an increased interest in combatting the morbidity and mortality impact of pollution at source.In recent years,regranted funding(i.e.,funding via an intermediary foundation)has become more prevalent,increasing from 6%of total in 2018 to 35%in 2021.Motivations for using regranting intermediaries varies among philanthropic foundations.In a disparate field such as air pollution,regranting can enable foundations to get up to speed quickly by making the most of a regranters expertise and networks.Regranters can also play wider roles in building capacity,campaigning or convening a community.38 Regranting practices vary across focus areas.While most CEE and social justice focussed foundations fund directly to air quality implementors(63%and 51%in 2021 respectively),those with a focus on children tend to channel funding through regranting institutions(with 59%of funding being regranted in 2021).u Reported in the OECD-DAC database.IMPROVING AIR QUALITY IN AND AROUND LONDON SCHOOLS IMPACT ON URBAN HEALTHThe health effects of air pollution are unequal,particularly in cities.Children are among the groups that are disproportionately affected because their immune systems,lungs and brains are still developing.Impact on Urban Health,a health funder based in London,funded a project that aimed to understand the sources of air pollution in and around in London and to test the effectiveness of different solutions.Supporting schools to protect childrens health The project brought together a multidisciplinary team to support three schools,including engagement specialists Global Action Plan,technical advisors Arup,and evaluators at the University of Surrey.The team provided schools with the necessary expertise to implement solutions,while filling a resource gap a well-known barrier to schools acting on air pollution.The solutions were categorised as:educational(teacher engagement workshops),behavioural(anti-idling campaigns)and physical(installing an air purifier and green screens of plants).The team also measured air pollution levels before and after interventions to gauge effectiveness.As a result of the solutions,the project significantly reduced air pollution in and around schools:A temporary road closure for a car free day reduced particulate matter by up to 36%.Repairing windows increased ventilation rates by 12.5%,which reduced carbon dioxide by up to 40%.A green screen at the front of a school,close to a busy road,reduced particulate matter by up to 44%during crosswind conditions.Using air cleaning devices reduced in-class concentrations of particulate matter by up to 59%.Blueprint for school action on clean air worldwideThe project shows that schools can take practical action to reduce the effects of air pollution on students.Working with schools on air quality can be challenging,especially because schools have limited capacity.That is why practical tools that demonstrate the effectiveness of interventions,and how to implement them in a cost and time effective way,are useful for schools and local authorities.The insights from this work have been organised into educational resource packs,evidence-based toolkits,and case studies,which are all available via the Transform Our World website.46The State of Global Air Quality Funding 202247The State of Global Air Quality Funding 2022TACKLING SOCIAL INJUSTICEAir pollution is a global emergency,yet levels of pollution,exposure and health impacts also vary between neighbourhoods and streets.Historically marginalised(including tribal,indigenous,Dalit)and poorer communities are likely to experience the greatest burden of air pollution.A growing body of evidence illustrates the inequities of exposure to air pollution.In the US,polluters have been shown to disproportionately affect racial-ethnic minorities,39 with polluting facilities predominantly located in historically low-income neighbourhoods and communities of colour.40 For example,in the state of Louisiana a corridor of industry overlays what was formerly known as Plantation Country-locally named Death Alley.Residents of the primarily black communities that live there breathe some of the most toxic air in the country,and as a result suffer high rates of cancer and mortality from COVID-19.41The social injustice of the air we breathe is exacerbated by the fact that poverty and existing health inequities act to worsen the health and social impacts of air pollution.These worse impacts are also often felt by those who are least responsible.Without a social justice lens,action on air pollution risks maintaining these disparities despite improving air quality overall.42Philanthropic foundations are becoming increasingly focused on equity and social justice,with foundations based in the United States committing nearly$500 million to racial justice in 2020.43 The sharp rise in social justice funding on air quality projects(Figure 3.5)illustrates that many funders are drawing this link between air pollution and social justice.In 2021,foundations with a social justice focus area represented roughly a third of all foundations making grants on air quality.These funders made$62.8 million of direct and regranted funding to air quality in 2021,more than doubling from 2020 levels.This rise indicates that the big bets made on air quality in 2021 have come from foundations with a social justice focus.The majority(75%)of direct funding to air quality projects from social justice funders in 2021 was from foundations headquartered in the United States,reflecting the increasing emphasis on social justice seen in the US since 2020.Of this funding,76%was spent domestically in the US(Figure 3.7).48The State of Global Air Quality Funding 2022FIGURE 3.6.FLOW OF FUNDING FROM FOUNDATIONS WITH A SOCIAL JUSTICE FOCUS AREA BY LOCATION OF FOUNDATION HQ(LEFT)AND PROJECT LOCATION(RIGHT),2021Of the social justice funders making grants on air quality in 2021,81%also have a CEE focus area.The strong link to climate and environment programmes suggests that air pollution is acting as bridge topic within work on environmental justice and just transition.Health equity(where all people have the same opportunity for good health outcomes)is a major component of social justice.A 2016 report in Grantwatch44 found that investment in and attention to environmental hazards,including air pollution,have been insufficient to realise the potential for reducing negative impacts on health and associated disparities.In 2021,44%of social justice funders working on air quality projects also had a health focus.Therefore,while some of the foundations that are prioritising CEE and social justice simultaneously are also working to improve public health,there is scope for further synergy between the issues.United States24.2United States18.5Africa 0.1India 0.6India8.7United Kingdom6.8Europe2.0United Kingdom2.0Other Asia-Pacific 0.3China 0.5Global 0.2Switzerland 0.7Funder Location(USD million)Project Location(USD million)49The State of Global Air Quality Funding 2022MOST FOUNDATION FUNDING ON AIR QUALITY IS ALSO FOCUSSING ON TACKLING CLIMATE CHANGETackling air pollution and climate change in isolation can lead to damaging trade-offs.Coordinated,intentional action by foundations can be a win-win in tackling climate change and air pollution together.Due to the interconnected nature of the two issues,we see overlaps in foundation funding where projects tackle both air quality and climate change simultaneously(Figure 3.7).Most tracked foundation funding to air quality(67%,or$42.8 million)is also considered to be climate mitigation.v Conversely,foundation funding which as an explicit aim tackles both air pollution and climate change is just 2%of all foundation grant making on climate mitigation.The remaining 98%of foundation funding to climate mitigation($1.9 billion)w fails to intentionally capture synergies between the two issues,just as with international development funders.While it is likely that the vast majority of these projects have co-benefits or implicit benefits for air quality,without tackling the issue intentionally,they may not be reaping the associated health and economic benefits.FIGURE 3.7.INTERLINKAGES BETWEEN AIR QUALITY FUNDING,AIR QUALITY&CLIMATE FUNDING AND CLIMATE MITIGATION FUNDING FROM PHILANTHROPIC FOUNDATIONS,2021 VWSource:ClimateWorks Foundation(2021)45v Funding types are defined using ClimateWorks Foundations database of foundation funding on climate mitigation and Clean Air Funds database on foundation funding on outdoor air quality.w Total foundation giving on climate mitigation in 2021 is based on a 2020 estimate from ClimateWorks Foundation.As 2020 is the most recent year of data,we assume that in 2021 total climate foundation mitigation funding is at the same level or higher.50The State of Global Air Quality Funding 20224.STATE OF AFRICAN AIR QUALITY FUNDING Air pollution(both indoor and outdoor)was responsible for 1.1 million deaths in Africa in 2019 the second largest cause of death,exceeded only by HIV/AIDS.x Outdoor air pollution levels caused 40%of these deaths and,though improvements are being made on indoor air quality,rapid urbanisation and fossil fuel-based economic growth promises to massively increase outdoor air pollution.In a worst-case scenario,air pollution concentrations will increase exponentially up to levels now seen in some Asian countries.46 Indeed,according to UNEPs Air Pollution and Development in Africa report,increased levels of outdoor air pollution in Africa could be the beginning of“a looming problem”becoming a much larger cause of disease and premature death while posing a major threat to economic development.The upcoming COP27 in Egypt is a unique opportunity to raise awareness of the importance of tackling air pollution in the continent and to mobilise the resources needed.AFRICAN COUNTRIES ONLY RECEIVE 3.7%OF INTERNATIONAL DEVELOPMENT AIR QUALITY FUNDING Despite the urgent need to tackle air pollution in the continent,Africa continues to receive a meagre share of total air quality funding.Between 2015 and 2021,international development funders committed only$403.6 million to tackling air pollution in the region,representing 3.7%of total air quality funding(Figure 4.1).This means that for every$1000 committed for clean air projects,only$37 went to African countries.Though this share has increased over time(from 1.1%in 2015-2016 to 8%in 2020-2021),it is still disproportionately low if we consider that 26%of global deaths caused by outdoor air pollution are in Africa.47 International development funders,which are strategically well positioned to push forward the air quality agenda,must increase their commitments to clean air in the region.x GBD 2019 Risk Factor Collaborators.Global burden of 87 risk factors in 204 countries and territories,1990-2019:a systematic analysis for the Global Burden of Disease Study 2019.Lancet 2020 396:1135-59.“Air pollution was responsible for 1.1 million deaths in Africa in 2019 the second largest cause of death after HIV/AIDS.”51The State of Global Air Quality Funding 2022Air quality funding in Africa was highly concentrated geographically,with five countries receiving 88%of total flows in 2015-2021:Egypt(54%),Morocco(24%),Uganda(5%),Niger(3%)and Sudan(3%).This is mainly because funding goes to a few large projects.For example,virtually all air quality funding going to Egypt was committed in 2020 by the International Bank for Reconstruction and Development(IBRD)for the greater Cairo air pollution management and climate change project($200 million).FIGURE 4.1.AIR QUALITY FUNDING GOING TO AFRICA AS A SHARE OF TOTAL AIR QUALITY FUNDING BY INTERNATIONAL DEVELOPMENT FUNDERS,2015-2021VIRTUALLY NONE OF THE CLIMATE PROJECTS FUNDED BY INTERNATIONAL DEVELOPMENT FUNDERS IN AFRICA HAD AIR QUALITY OBJECTIVES International development funders continue to consider air quality and climate change as separate issues when funding projects in Africa,more so than in the rest of the world.Between 2015 and 2020,only 6%of total air quality funding in the region also simultaneously tackled climate change as opposed to 76%globally(see analysis in Section 2.2).At the same time,virtually none of the climate mitigation and adaptation commitments made by international development funders in Africa had air quality explicit objectives.During 2017-2020,funders committed cumulative$48 billion to climate projects in the region;air quality&climate funding accounted for only 0.02%of these flows much lower than the global average share of 2.2%in 2015-2020(see analysis in Section 2.2).While this shows how little attention has been given to simultaneously tackling climate change and air pollution,it also demonstrates the great potential to leverage international public climate finance flows to scale up air quality&climate funding in the region.For example,we estimate that during 2015-2020,an additional$1.2 billion in climate finance committed by international development funders to Africa also had direct air quality benefits,though these were not explicitly included among project objectives.52The State of Global Air Quality Funding 2022INTERNATIONAL DEVELOPMENT FUNDERS COMMITTED 36 TIMES MORE FUNDING TO FOSSIL FUEL-PROLONGING PROJECTS THAN AIR QUALITY IN 2015-2020 Air quality funding in Africa remained low at around$67 million per year and international development funders commitments to fossil fuel-prolonging has hovered at around$2.4 billion per year(Figure 4.2).Between 2015 and 2020,international development funders cumulatively committed 36 times more funding to fossil fuel-prolonging($14.6 billion)than air quality($403.6 million).One such example,is the$200 million,18-year loan from international development funders to Mozambique to develop their natural gas reserves(see more on this on page 49).Supporting energy-poor African countries to replace dirtier,more expensive,fossil fuel options may seem advantageous in the short-and medium-term.However,the serious long-term health and environmental impacts must be taken into account too.Also,the opportunity to invest in fossil fuel projects should be weighed up against the investment opportunity of renewables,such as wind,hydro,geothermal and solar energy which are plentiful and largely untapped in countries like Mozambique.Issues of environmental justice need to be considered too.Donor countries have been challenged for seeking to block financing for fossil-fuel powered energy generation in low-and middle-income countries,while continuing to fund such activities back home.48 To make matters worse,many countries dump outdated technologies such as used cars and lower-grade fuels on African countries,further burdening the continent with a problem they did not create.49“In Africa,international development funders committed 36 times more funding to fossil fuel-prolonging($14.6 billion)than to clean air measures($403.6 million).”53The State of Global Air Quality Funding 2022FIGURE 4.2.INTERNATIONAL DEVELOPMENT FUNDING GOING TO AIR QUALITY PROJECTS VS.FOSSIL FUEL-PROLONGING PROJECTS IN AFRICALooking at the country-breakdown,Egypt was also the largest recipient of fossil fuel-prolonging funding over the period(43%of the continental total,or$6.3 billion),an interesting dynamic in light of the upcoming COP27 to be held in Sharm el-Sheikh.The bulk of tracked finance was for oil and gas extraction/production,with a number of energy efficiency investments and other refurbishments at a Suez refinery.Similar to air quality funding,fossil-fuel prolonging funding in Africa was also geographically very concentrated,with 10 countries receiving 90%of commitments.Figure 4.3 compares the top five country recipients of international development funding for air quality(left)and fossil-fuel prolonging(right).54The State of Global Air Quality Funding 2022FIGURE 4.3.TOP 5 AFRICAN COUNTRIES RECEIVING AIR QUALITY AND FOSSIL FUEL-PROLONGING FUNDING BY INTERNATIONAL DEVELOPMENT FUNDERS,2015-2020Of the funding to fossil fuel prolonging projects 76%($11.1 billion)went to upstream oil and gas activities(i.e.extraction,production,refinery and storage)which have impacts on air pollution directly and indirectly.Almost 22%of funding commitments($3.2 billion)were for the construction of oil and gas power generation plants with direct impacts on air pollution.In 2015-2020,international development funders provided 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