A BNP Paribas survey of asset managers and owners incorporating ESG strategies finds that the majority of investors in the Asia Pacific region are aligning their ESG investment framework with the UN Sustainable Development Goals (SDGs). Data and technology costs remain barriers to ESG integration, but investors are optimistic, with over half predicting up to 75% of their funds will be allocated towards ESG by 2021.
The key findings of the ESG Global Survey 2019 include:
- Stronger commitment to ESG investment: While Asia Pacific respondents lag behind global counterparts in terms of asset allocation into ESG (15% vs 18% globally), they are more optimistic about allocation of funds in the future, with 55% of Asia Pacific respondents expecting to incorporate between 50% – 75% in ESG funds in two years’ time, compared to 49% globally.
- The outperformance factor: ‘Improved long-term returns’ was ranked as the top reason for ESG investment for Asia Pacific respondents, with almost two-thirds (57%) ranking this as a key reason compared to 52% globally. 70% of Asia Pacific respondents expect their ESG portfolios to outperform over the next five years, while 60% of global respondents do so.
- The great disclosure: While returns are top of mind for Asia Pacific respondents, more of them (62%) expect an increase in ESG disclosure requirement over the next 12 months compared to only 59% globally.
- New jobs in ESG investing: The growing prevalence of ESG investing has led to a number of new roles requiring relevant expertise. Asia Pacific asset owners and managers are more likely to hire new ESG talent from non-traditional backgrounds (38% vs 29% globally), train incumbent teams in ESG principles and best practice (46% vs 40%) and hire or increase numbers of external ESG consultants/ specialists (48% vs 34% globally).
- The UN SDGs are a new compass: More Asia Pacific respondents (76%) indicated that their organisation aligns investment framework mainly by setting SDG-related revenue targets for investee companies with the UN’s SDGs than globally (65%).
- Tactical impact: Globally, the highest number of respondents indicated that investing in companies based on their ESG profiles have had the greatest impact on their sustainable strategy (45%). In Asia Pacific, respondents seem to be more convinced by benchmarks, where 42% of respondents indicated that benchmarking funds against an ESG benchmark have had the greatest impact, compared to only 37% globally.
- Data and technology costs are barriers: As was the case in 2017, data remains the biggest barrier – ahead of costs, a lack of advanced analytical skills and greenwashing risks. One-quarter of respondents cite technology costs as a barrier to ESG integration (doubling from 16% in 2017).
Madhu Gayer, Investment Analytics & Sustainability Manager, BNP Paribas Securities Services, said: “While Asia’s optimism in terms of asset allocation to ESG may not come as a surprise as multiple Asian markets, not least China, have pushed for increased regulation surrounding ESG disclosures, challenges such as transforming disparate data sets into actionable insights and technology costs hinder progress.
“As a bank committed to building a sustainable future, we are pleased the BNP Paribas survey identifies these pain points where we can work together to solve”
About the survey:
BNP Paribas surveyed 347 institutional investors incorporating ESG strategies representing about USD 23 trillion in assets under management. Across Asia Pacific, 110 asset owners and managers were included from China, Hong Kong, Japan, India, Malaysia, Singapore, Australia and New Zealand.
To access the full report, please visit: https://securities.bnpparibas.com/global-esg-survey.html
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