ESG Viewpoint: Emerging responsible investment trends in Asia

ESG Viewpoint: Emerging responsible investment trends in Asia

The appetite for responsible investing is growing in Asia, as regulations evolve and client demand increases. With this, social issues, such as a just transition, supply chain due diligence and gender diversity gain prominence.

A recent trip by members of Columbia Threadneedle Investments’ responsible investment team to Tokyo for Principles for Responsible Investment (PRI) in Person – the world’s largest responsible investment conference – confirmed the significant appetite for responsible investment in Japan and across Asia, as well as the region’s commitment to developing a dynamic and well-functioning sustainable and responsible investment market.

Responsible investment practices in Asia have often been perceived to lag global peers. This is usually attributed to historic barriers, such as a limited understanding of ESG issues and how to integrate these into the investment process, as well as a lack of standardised and comparable ESG data. These barriers are slowly being overcome, with a growing recognition of the materiality of ESG issues, particularly environmental and

social ones, following the recent flurry of net zero and carbon neutrality commitments from Asian governments and in the wake of the social issues brought to light by the COVID-19 pandemic. Improvements in the quantity and quality of corporate ESG disclosures – driven by investor engagement, stock exchanges, regulation and an emerging consensus on a global sustainability reporting standard – have helped to support the integration of ESG issues into the investment process.

Greater awareness of ESG issues and their materiality has created significant client demand for ESG incorporation and products among investors in Asia. The market share of ESG funds in Asia has doubled since the end of 2020, with Asian-focused ESG fund inflows growing faster than any other region. Meanwhile, Asian signatories to the PRI have also doubled between 2020 and 2023, to over 500 members.

Asia’s evolving regulatory environment

After Europe, Asia has seen the largest growth in sustainable finance policy instruments globally, with Asian regulators using a host of sustainable finance policy instruments.These include moving beyond voluntary corporate ESG disclosures towards mandatory implementation, while the growth in assets under management allocated to responsible investment has led regulators to adopt ESG fund disclosures and labelling regulation, to tackle greenwashing. Additional focus areas for Asian policymakers have also been sustainable and green finance taxonomies, and the introduction and revision of stewardship codes.

Key material ESG issues in Asia

While Asian economies are highly diverse, they face a shared challenge of maintaining economic development, while simultaneously transitioning their economies to meet the goals of the Paris Agreement. Growing populations, rising incomes and urbanisation will increase energy demand in the region. With approximately 85% of current Asian energy demand being met by fossil fuels, this is anticipated to increase Asia’s share of global greenhouse gas emissions, despite the per capita footprint being lower than the global average.

Interested in learning more?

We discuss these points in more detail, while also considering our engagement across the region and our key takeaways from the Principles for Responsible Investment (PRI) conference in TokyoDownload the full ESG Viewpoint to learn more.

15 March 2024
Tom Barron
Senior Associate, Responsible Investment
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This document is intended for informational purposes only and should not be considered representative of any particular investment. This should not be considered an offer or solicitation to buy or sell any securities or other financial instruments, or to provide investment advice or services. Investing involves risk including the risk of loss of principal. Your capital is at risk. Market risk may affect a single issuer, sector of the economy, industry or the market as a whole. The value of investments is not guaranteed, and therefore an investor may not get back the amount invested. International investing involves certain risks and volatility due to potential political, economic or currency fluctuations and different financial and accounting standards. The securities included herein are for illustrative purposes only, subject to change and should not be construed as a recommendation to buy or sell. Securities discussed may or may not prove profitable. The views expressed are as of the date given, may change as market or other conditions change and may differ from views expressed by other Columbia Threadneedle Investments (Columbia Threadneedle) associates or affiliates. Actual investments or investment decisions made by Columbia Threadneedle and its affiliates, whether for its own account or on behalf of clients, may not necessarily reflect the views expressed. This information is not intended to provide investment advice and does not take into consideration individual investor circumstances. Investment decisions should always be made based on an investor’s specific financial needs, objectives, goals, time horizon and risk tolerance. Asset classes described may not be suitable for all investors. Past performance does not guarantee future results, and no forecast should be considered a guarantee either. Information and opinions provided by third parties have been obtained from sources believed to be reliable, but accuracy and completeness cannot be guaranteed. This document and its contents have not been reviewed by any regulatory authority.


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