ESG consideration is gaining more acceptance from investors across the Asia-Pacific (APAC) region, according to the APAC results released by Franklin Templeton of a comprehensive global study on ESG adoption, implementation and development across institutional and wholesale asset owners globally. The study was conducted by NMG Consulting.
ESG considerations gain acceptance
Results show investor predisposition towards ESG investing in APAC is rising rapidly, but investment adoption and application methods differ across the region. Globally, ESG is now a central consideration for asset owners, with a large majority building their capabilities in this area. The study shows that two-thirds (67 percent) of APAC respondents now consider ESG an important component within the investment process. Across APAC, 71 percent of asset owners are investing to increase their ESG knowledge and expand their investment capabilities in this area.
Early ESG adopters are confident of higher returns
As ESG considerations gain acceptance, there is a high degree of consensus on the risk benefits, but differences of opinion on the impact on returns. ESG adopters in Australia and New Zealand (ANZ) in particular, no longer accept that ESG investing must mean accepting lower rates of return. An impressive 94 percent of ANZ respondents believe that ESG investments will in fact enhance returns. While ANZ leads in this belief, other Asian countries are not far behind with 80 percent holding this view across the rest of the region.
‘Governance’ factors key, ‘Environmental’ concerns are rising
The study found that the three components of ESG investing (Environment, Social, and Governance) have become interdependent as asset owners globally now view them as linked. Overall, European asset owners focus on a broader set of ESG issues, reflecting the region’s longer track record on responsible investing, while APAC and North American ESG adopters tend to have a narrower focus. However, in APAC, of the two prioritized criteria “environment” and “governance”, shifts in priority over time has seen “E” becoming more important. Seventy percent of respondents consider environmental factors as their first or second priority among the three factors.