Asia is still lukewarm toward ESG investing, but is likely to closely follow in the footsteps of more developed markets. Understand how asset owners and retail distributors are incorporating ESG investing into their strategic plans with our latest research and analysis.

ESG is of Growing Importance to Asset Owners

More than 80% of asset owners have communicated to managers that ESG integration is important, while almost three-quarters of those surveyed require managers to document their ESG integration approach. Asset owners will select ESG managers based on the extent of ESG integration into the investment processes, quality of ESG disclosures, and the corporate governance structure.

Asia Pacific ex-Japan Asset Owners’ Views on Criteria for Selecting an ESG Manager, 2019

116AsiaESG.png

Source: Cerulli Associates

Strategies Asset Owners Are Keen to Employ ESG Principles in Over the Next Two to Three Years

According to Cerulli’s interviews and survey findings, institutions are examining the feasibility of implementing ESG factors in their investment strategies. Nearly 65% are keen to employ ESG principles in equities, followed by alternatives strategies, 46%. .

Asia ex-Japan Asset Owners’ Views on Strategies They Are Keen to Employ ESG Principles in Over the Next Two to Three Years, 2019

102AsiaESG.png

Source: Cerulli Associates | Analyst Note: Respondents were asked to select multiple options.

ESG Investment Approaches Vary Among Asset Owners in Asia

Negative Screening

Negative screening or exclusion is considered one of the earliest forms of ESG investing. The number of asset owners that have started filtering out stocks has increased in recent years. Our asset owner surveys reveal that almost 45% started implementing exclusions over the last one to three years.

Asia ex-Japan Asset Owners and Managers’ Views on Preferred Way of Implementing ESG in Their Investment Processes, 2019

104AsiaESG.png
Source: Cerulli Associates


Active Investing

Eliminating a company from a list does not address the crux of ESG integration. An active approach can be achieved through engagement with investee companies.

Asia Pacific ex-Japan Asset Owners’ Average Length of Time They Have Had Active Ownership Process in Place, 2019108AsiaESG.png

Source: Cerulli Associates

Integration of ESG Factors

Almost 70% of asset owners have investment policy statements that include language about ESG priorities, principles, or decision criteria. This is prominent among Australian and Hong Kong asset owners.

Asia Pacific ex-Japan Asset Owners’ Policy on ESG Integration, 2019109AsiaESG.png

Source: Cerulli Associates


Retail Uptake of ESG

Distributors and family offices, especially those that cater to wealthy investors, are taking heed of ESG. While distributors are more inclined to look at performance track record and consistency in investment processes, nearly 82% have plans in the next two years to onboard ESG-themed equity funds, particularly in Hong Kong and Singapore.

Asia ex-Japan Distributors’ Plans for ESG- Centric Products to Onboard Over the Next Two to Three Years, 2019121AsiaESG.png

Source: Cerulli Associates

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