Here, investment professionals share views with ESG Clarity on the Asia’s direction for the year ahead with ESG disclosures, green technologies and the energy transition all featuring as areas to watch.
Asia had a leading role in moving ESG forward in 2021, according to Pictet Asset Management’s head of emerging markets equities, Kiran Nandra, who said the region has been at the “forefront of the ESG debate”, while Holly So, ESG specialist at Mirae Asset Global Investments (Hong Kong), said she the key drivers behind ESG demand in Asia – investor pressure, low carbon regulation, and impact-led investments – will remain strong in 2022.
Mirae’s So added although the Asia may still be struggling with ESG disclosures, it has seen big improvements.
“Notwithstanding the lack of comprehensive disclosures – increasing corporate awareness and stringent ESG reporting requirements have led to improvements in the ESG disclosures in the last couple of years,” she said.
For asset manager Eastspring, it is Asia’s coal to clean energy transition that is particularly pressing as an issue to work on in 2022 with many Asian economies still relying heavily on coal as a primary source of energy.
“The transition needs to be holistic as people, jobs and infrastructure will be affected,” the Eastspring team told ESG Clarity.
“Meanwhile,” the Eastspring team continued, “we should see more renewable energy as well as green bond issuances, especially from China.”
Mirae’s So also flagged renewables, saying they provided an exciting space for opportunities in Asia next year: “Reinforced by national targets like China and India’s net-zero goal, over the medium term, we believe the decarbonization momentum will drive opportunities for investment in renewables and the supply chain for green applications.”
Nandra agreed, saying sustainability continues to be at the forefront of investors’ minds.
“But we think there will be a clearer ‘top line’ link between the E and the S in particular, with top and bottom line impacts.
“Whether this is through China, for example, choosing to refocus its economy away from property towards renewable energy or additionally having second order impacts across the value chain including ‘greenablers’ such as the semiconductor industry, the effect is likely to become increasingly tangible,” she commented.
Eastspring also pointed electric vehicles (EVs) as an area where stewardship has the chance to shine – helping companies in their green transition. The investment team said it is seeing these opportunities with both EV manufacturers and in the EV supply chain.
The group pointed out these opportunities will look different depending on the market within Asia an investor is looking at: “Each market will create unique opportunities as they forge different paths to reduce their carbon footprint. For example, Korean auto makers and ship builders are expected to play a big role in Korea’s hydrogen economy.”
Nandra warned an issue to watch closely in the coming year was “runaway valuations for potentially hyped-up industries – given the volatility witnessed this year in darling stocks or sub-industries, this is something we maintain a close eye on.”