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A public ESG commitment? Not quite yet, say half of Asia’s asset owners | Asset Owners Asian InvestorA public ESG commitment? Not quite yet, say half of Asia’s asset owners | Asset Owners Asian Investor

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Impact Investing Forum 2022

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London. April 28-29, 2022.

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ESG might be the talk of the town in the rest of the world, but Asia’s asset owners are still playing catch up with 46% saying they were either not considering putting an ESG policy statement in place or were still undecided, according to a new report.

As a result of this low level of policy activity in the region, just 11% of investor funds were being put into ESG assets or related products, according to the latest Willis Towers Watson ESG Beliefs and Practices Survey 2021.

The survey collected feedback from 63 asset owners in Asia in the first half of this year of which 50% had an asset size of more than $1 billion. About half of them were based in Japan, with the rest in Hong Kong, Korea, Singapore, Taiwan, and other Southeast Asian countries.

Source: Willis Towers Watson

Noting that the creation of internal ESG objectives or policies was the first step towards ESG investment, it found 26% of asset owners in Asia did not have a public ESG policy statement in place nor were they considering having one.

A further 20% said they were still not sure about it. An ESG statement refers to a written statement outlining ESG policies or beliefs at an institution and is often linked to existing investment policies.

BEST PRACTICE

“It is not a requirement to have [such statement], but it is a best practice. Asia could be slower to adopt. But there are also plenty of western funds that have not yet done anything on this front,” noted Jayne Bok, head of investments Asia with Willis Towers Watson.

In Asia, risk management is a primary driver of ESG integration, the report noted.

“However, Asia Pacific is a large and diverse region with asset owners across the region having a range of drivers and motivations,” said Helena Fung, head of sustainable investment, APAC at FTSE Russell.

“Asset owners that are linked to government entities can become another source of sensitivity,” Fung added.

“Concerns over greenwashing, the lack of transparency and data around sustainable investing, combined with the lack of consistency in definitions, data and methodologies, have made sustainable investing somewhat challenging for most institutional investors,” said Angus Hui, head of credits for Asia at Schroders.

COLLECTIVE EFFORTS

This has highlighted the urgency for Asian countries to draft ESG and climate-related regulations on data disclosure and reporting requirements, the report said.

According to the Willis Towers Watson survey, 41% of asset owners said they were not held accountable by stakeholders for reporting on ESG issues above and beyond financial reports.

“Regulatory pressure is expected to alter such a balance [in the future],” the report said. In Hong Kong, disclosures as recommended by the Task Force on Climate-Related Financial Disclosures (TCFD) will be mandatory for listed companies, banks, asset managers, insurance companies, and pension trustees by 2025.

There were also similar discussions in Korea, Japan, and Singapore on whether to make ESG or climate disclosures mandatory, the report noted.

Recent climate-related public policy and green financing initiatives in selected Asian countries

Source: Willis Towers Watson

On a positive note, however, 31% of these asset owners already had ESG policies in place and had made them public, with the rest either planning to (10%) or considering doing so (13%).

The report said that it was now acknowledged by the industry that bigger asset owners should take a leading role in educating and assisting smaller market players in their home countries to incorporate ESG considerations into their portfolios.

At a recent international ESG conference held in Seoul, two of the biggest public asset owners in Korea, the Korea Investment Corporation and the National Pension Service, both pledged to enhance ESG strategies internally as well as promote ESG awareness in their home market through greater engagement with domestic institutional investors.

Similar strides were also being made in Japan, with the Government Pension Investment Fund (GPIF) – as well as large life insurance companies such as Nippon Life Insurance, Sumitomo Life, and Meiji Yasuda Life Insurance – being active in establishing memberships at major global initiatives such as the United Nations-convened Net-Zero Asset Owner Alliance.

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