- 84% of APAC institutional investors currently incorporate ESG
- 61% of APAC institutional investors see lack of robust data as barrier to further adoption
- 31% of global asset managers worried about mounting costs incorporating ESG
- Investment in ESG alternative assets set to increase 22% across APAC
Asset owners and asset managers in Asia Pacific have leapt ahead of their European and North American counterparts when it comes to incorporating Environmental, Social and Corporate Governance (ESG) related strategies into their investing, according to a new report from BNP Paribas Securities Services.
The leading global custodian surveyed more than 460 institutional owners and asset managers, representing about USD$5.4 trillion in assets under management. Across APAC, 135 institutional owners and managers were included, drawn from China, Hong Kong, Japan, India, Malaysia, Singapore, Australia and New Zealand, representing USD$1.4 trillion in assets under management.
The report, “Great Expectations: ESG – what’s next for asset owners and managers” found that 84% of the Asia Pacific-based institutional investors surveyed currently incorporate ESG into their investment decision making, compared with 82% in Europe, and only 70% for North America. And while a fifth of APAC institutional investors currently market a majority of their funds as ESG-compliant, more than 60% expect to do so within two years, highlighting the world’s fastest-growing region is also moving fast in the direction of sustainability.
According to the report, 46% of APAC institutional investors felt environmental considerations were the most important, compared with 29% for corporate governance and 25% for social concerns.
BNP Paribas Securities Services’ Head of Investment Analytics for the APAC region, Madhu Gayer, said: “In the last couple of years, we have seen some of Japan’s largest institutional investors, including GPIF which is the biggest pension fund in the world, incorporating ESG into their investment practices. This has a major trickle-down effect on the investment value chain, from asset managers to providers of data.”
The capability gap
Across Asia Pacific, a lack of robust data was cited as the most significant barrier to further incorporation of ESG, with 61% of institutional investors agreeing. However, Asia Pacific’s institutional investors are confident they will overcome this challenge as in two years, only 9% expect data to remain a barrier to further ESG incorporation.
Mr Gayer added: “This shortage of data to support ESG investments has led some senior management ranks to be more sceptical, which has in turn limited adoption across the Asia Pacific region, and globally more generally. However, smart data, artificial intelligence and ESG specialists will play a crucial role in helping to break down these barriers in the next few years.”
About BNP Paribas Securities Services (www.securities.bnpparibas.com)
BNP Paribas Securities Services, a wholly owned subsidiary of the BNP Paribas Group, is a leading global custodian and securities services provider. Backed by the strength of the BNP Paribas Group, we provide multi-asset post-trade and asset servicing solutions for buy and sell-side market participants, corporates and issuers. With offices in 34 countries and a global reach covering around 95 markets, our network is one of the most extensive in the industry, enabling clients to maximise their investment opportunities worldwide.