Market Commentary

Investor demand and challenges are driving ESG considerations in the Asia-Pacific

Posted by Anton Murray Consulting on . Posted in Market Commentary


It is no secret that awareness of environmental, social and governance (ESG) issues has been on a steep upward trajectory in the Asia-Pacific financial industry, driven by growing interest from the community and government, coupled with increased client interest and demand. However, while awareness has been surging, end investors may not be confident in the value of implementing ESG factors in their portfolios. Successfully advancing ESG considerations in the region will require a clear articulation of the investment case for ESG, and a careful examination of which ESG issues are most relevant for each specific market, industry and company.

Trends and industry challenges

Asset managers across the Asia-Pacific region have seen accelerated demand for ESG funds and growth in assets under management (AUM). Yet there is still confusion about what ESG strategies entail – no surprise when you consider that the term ‘ESG investing’ is typically used to cover many different approaches, from funds that integrate analysis of ESG considerations into the investment process, to strategies such as negatively screened ethical funds, thematic sustainability funds and impact investing. There is little doubt that investors need to understand the ESG issues within their portfolios in order to fully evaluate investment risk. Investors also have a critical role to play, through their product and investment decisions, in financing the solutions to sustainability challenges; these include the transition to a low-carbon economy and the adaptation to climate change impacts. Regular engagement with high-emitting investee companies is essential for investment firms so they can obtain a good understanding of their climate-risk exposure, challenge emitters and promote industry best practice in climate-risk management.

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