By and large, for many companies in Asia, disclosing to stakeholders their approach to ESG issues is still new territory. Companies in the region vary in their quality of governance, disclosures and transparency, and there are plenty of state-owned firms, as well as entrepreneurial businesses, with poor track records of fair treatment towards minority shareholders.
As such, evidencing and reporting both from a financial as well as non-financial (ESG factors) perspective differs widely, and information from third-party ESG providers can also vary due to different approaches of assessing the ESG credentials of companies.
There are a small but growing number of responsible funds in Asia, with some taking a passive or active approach and including either a range of exclusions (for example, tobacco, gambling etc) or a mixture of exclusions and/or sole focus on impact (investing in firms providing solutions to environment or social issues).
Click here to see the responsible ratings and analysis of three Asia funds.
There is also a group of funds that take a revenue-based approach, investing in stocks listed outside this region, often in firms whose business activities are focused on Asia. Whether some strategies are focusing on the whole of the region or a single country, the growing use of ESG factors in a fund’s investment process is of interest to a range of investors and is often used to great advantage both to enhance returns and, perhaps even more importantly, to understand and manage risk.
How ESG is assessed within a fund is therefore an important component of understanding a manager’s strategy, investment philosophy and style of management.
Read the full analysis in ESG Clarity’s November 2021 digital magazine.