ESG theme for stocks to accelerate in 2022 – Mint

ESG theme for stocks to accelerate in 2022 MintESG outlook 2022: investors seek better disclosure for thematic investing | Fund Managers Asian InvestorAnother busy year expected with more regulation, investor activity Pensions & InvestmentsESG shares underperform oil and gas in 2021 Financial TimesESG theme for stocks to accelerate in 2022 MintESG outlook 2022: investors seek better disclosure for thematic investing | Fund Managers Asian InvestorAnother busy year expected with more regulation, investor activity Pensions & InvestmentsESG shares underperform oil and gas in 2021 Financial TimesESG theme for stocks to accelerate in 2022 MintESG outlook 2022: investors seek better disclosure for thematic investing | Fund Managers Asian InvestorAnother busy year expected with more regulation, investor activity Pensions & InvestmentsESG shares underperform oil and gas in 2021 Financial Times

In the context of the global debate about the effects of climate change, equity investors might pay more attention in 2022 to the theme of “net zero emissions”. “It is estimated that over $40 trillion, or more than 25%, of all professionally managed assets worldwide have some degree of environmental, social, and governance (ESG), theme overlay in the investment process. This percentage and number of assets is expected to increase in 2022 and beyond. This trend is still relatively new in India, but it is becoming increasingly important to investors in the Indian equity markets,” Vikram Gandhi (senior lecturer in business administration at Harvard Business School) said. View full image
Exponential Rise (Mint)
India is still in the beginning stages of its ESG journey. India declared its intention to reach net zero carbon emissions by 2070 at the UN Climate Change Conference (COP26). “This is likely will help us get much better marks in the ESG aspect comparison with our peers such China and Russia,” Kotak Mahindra Asset Management Co. Ltd stated last month. As more countries and companies implement policies to reduce carbon emissions, the focus on sustainable investing is expected to increase. ESG will be a key driver of investment decisions in this year’s Asia Pacific region. Currently, most Asian investors use an exclusion-based ESG screening that excludes stocks with negative ESG credentials. As reporting standards improve across Asia, we expect Asian investors to soon adopt impact-based ESG screening,” said Girish Naair, co-head Asia Pacific ESG research, BofA Securities. Recent research showed that Asia emitted 52% of global carbon omissions. BofA research has shown that Asia has passed close to 262 policies in the last ten year, compared with just 34 in the US, and 543 in Europe. ESG has gained more traction in India in the past one year. Reliance Industries Ltd., Ultratech Cement Ltd. and Hindalco Industries Ltd. are all investing in green energy to reduce their carbon footprint. Many asset management companies have launched ESG-focused mutual funds schemes in India in recent years. However, there are still challenges due to the lack of standardization in reporting. BofA’s research found that only 5% of stocks in Asia report metrics about emissions, compared to 66% in the US, and 78% in Europe. Market regulators around the world are working to address the lack of standardization by implementing policy. The Sustainable Finance Disclosure Regulation in Europe makes it mandatory that companies make ESG disclosures. The Business Responsibility and Sustainability Report (BRSR), which India’s top 1000 listed companies by market capital, will be mandatory starting in FY23. The BRSR is designed to provide quantitative and standardized disclosures about ESG parameters. It facilitates comparability across industries and should allow people to make better investment decisions. It remains to be seen how efficiently companies can meet their ESG targets. Investments in new technologies and manufacturing processes are required to make a business model sustainable. This could impact near-term operating cash flow and profits. According to Nair’s analysis, stocks in Asia with high ESG scores (MSCI) are trading at a 40% premium over stocks with lower ESG scores. He said that similar valuation premiums have been seen in other parts of Europe and the US. Mint keeps you informed and connected. Get our App Now! !

Read More