Driving ESG Investing in Asia
AVPN, 2018: Click here to read the report.
ESG Investing is a holistic approach to investing that incorporates critical environmental, social, and governance (ESG) factors into the investment analysis and decision-making process for an organisation.
There is growing evidence that ESG-aligned funds perform at par with benchmark indices. This incentivises investors to integrate ESG factors into their investment strategies, where ESG is incorporated as enhanced risk management responses to the evolving complexity of global systemic risks. Certain demographic groups, such as millennials and women investors, are also asking for investments that are both good for society and the environment, aside from their portfolio returns.
However, Asian investors still fall behind their global counterparts in the take-up rate of ESG Investing – this low take-up rate is indicative of a less mature ESG Investing environment, but can also be attributed to legacy issues, short-termism, lack of awareness, and talent gaps.
Fortunately, the mindsets and perceptions of Asian investors toward ESG Investing are changing owing to the wide sharing of successful ESG Investing-related experiences. Moreover, regulators and institutional investors are increasingly committing to internationally-recognised principles for ESG Investing and national stewardship codes.
In general, investors in Asia are represented across a broad spectrum of practices, perspectives, and experiences of the different maturity stages along their ESG Investing journey; each facing their own challenges while playing different pivotal roles.
To begin the ESG Investing journey, investors must first challenge the status quo and generate evidence for change. Identifying key knowledge gaps and areas to upskill are essential next steps to becoming ESG Investing experts. Finally, investors must identify ESG Investing champions who are leaders within their respective fields who can share their approaches and inspire others.
In this paper, we suggest six practical recommendations for advancing stakeholders in their ESG Investing journey. Implementing these suggestions at each stage will support the steady development of ESG capabilities, and chart a path for sustainable investing, growth, and development across Asia.