Regulation being created in lots of different places at the same time can cause complexity, says Mervyn Tang, head of sustainability strategy, APAC, at Schroders, who would like to see more global harmonisation.
Here, Tang tells ESG Clarity Asia about client demand for ESG in Asia and Schroders’ engagement approach in the region.
What are your plans for sustainable products in Asia?
Sustainability is evolving very quickly from ESG integration to focus on issues like impact and natural capital and biodiversity. This is driven by client demand, and we are seeing an overarching desire from investors to contribute to climate action.
A lot of the retail interest in Asia has been in the thematic space. Themes like sustainable food and water and the global energy transition have caught people’s attention.
When talking about individual markets there are more specific trends, and I think we are going to see more and more demand for localised impact solutions.
Do you have plans to grow the sustainability team in Asia?
The team has grown quite a bit. Since 2020 we have increased from one to six dedicated to sustainability in the region. We are at a point where it’s not like you can have a few specialists who do everything. You need sustainability ingrained into organisations, it is mainstreaming.
We continue to be focused on giving training and supporting colleagues across the business, from investment teams to distribution.
What’s on your sustainable regulation wish list in Asia?
It is challenging to deal with regulations that are being created in lots of different places at the same time, for both financial institutions and corporates we invest in.
A lot of the regulations that are coming up have the intention of dealing with greenwashing, which is important. But some harmonisation is really key for these regulations to do that job effectively.
Rules coming through are improving transparency in the market, but with that comes complexity. It is important to educate investors and other stakeholders on the numbers, for example carbon footprint number, which are not always easy to interpret.
Because of the complexity and the rate of change, there may also be times when different requirements come through before the data is available.
So on my wish list is global harmonisation.
How are you working to ensure a just transition in Asia?
Just transition finance is a really big conversation in Asia. Schroders is one of the founding participants in the Impact Investing Institute’s Just Transition Finance Challenge.
We encourage companies to identify potential adverse impacts from their net-zero transition plans and take steps to minimise these.
This is not necessarily Asia specific, but in our engagement we’re talking to companies about what their transition plans are and then asking for details on what they actually plan to do to deliver on targets.
What is key in parts of Asia is improving the quality of the data and transparency.
What is Schroders’ focus for engagement over the coming year with Asia corporates?
Our vision for active ownership sets out our six priority active ownership themes: climate change, human rights, diversity and inclusion, natural capital and biodiversity, human capital management, and corporate governance.
We were part of the Monetary Authority of Singapore-convened group that was chaired by the environmental organisation Global Canopy on how to apply a Taskforce on Nature-related Financial Disclosures. It’s working with companies as well as financial institutions on how to assess nature-related risks and opportunities facing particular sectors. This is increasingly important.
In general, there are more conversations on disclosures in APAC as a proportion than in other markets.