Most APAC Institutionals Undergo ESG Conversion

Sustainable investing continues to establish roots within the industry especially in Asia where over half of the region’s institutional investors will have largely implemented related factors in their processes by the end of the year.

Almost 60 percent of APAC investors expect to have incorporated environmental, social and governance (ESG) factors completely or «to a large extent» within their own investment analysis and decision-making processes by 2021-end, according to a recent survey by MSCI.

The combination of climate-related events, such as devastating wildfires, floods and droughts, and a global pandemic have accelerated the paradigm shift on ESG and climate change, MSCI president and chief operating officer Baer Pettit, highlighting outperformance by sustainable investing during the pandemic. Once an issue for ‘green funds’ and side-pockets, ESG and climate are now firmly established as high priority issues.

The survey involved 200 institutions, including 70 from the APAC region, with approximately $18 trillion of assets under management.

Although Asia is a relative laggard in sustainable investing compared to more mature markets, it is rapidly accelerating efforts.

According to the survey, 79 percent of APAC investors increased ESG investment significantly or modularity in repossess to the coronavirus, compared to the 77 percent average worldwide. This figure rises to 90 percent for the largest institutional investors (more than $200 billion of assets).

General growth aside, the region is also particularly focused on risks related to climate change.

50 percent of APAC ex-Australia, New Zealand and Japan investors consider climate change metrics for decision-making compared to the global average of 42 percent.

The reality is, climate change links to a rapidly shifting social context that in turn drives changes to investor demands, all within a very dynamic regulatory environment, Pettit added. These trends are amplified by technology innovation, adding significant cost and time pressure. Quite simply, investing has never been a more complex ecosystem.