Sustainable investing gathers pace in Asia-Pacific but challenged by lack of data: Robeco

WHILE sustainable investing in Asia-Pacific is catching up with Europe, implementation of ESG (environmental, social and governance) strategies in the region remains challenged by the lack of data, internal expertise as well as capacity and resources, according to a survey published by Robeco on Monday (Mar 21).

Some 300 of the world's largest institutional and wholesale investors across Europe, North America, and Asia-Pacific were surveyed in January this year, making up a total of around US$23.7 trillion in assets under management.

The survey found that investors view climate change as one of the most important ESG issues.Climate change is now central to or a significant factor in the investment policies of 75 per cent of investors.

The figure had risen to 70 per cent among Asian investors this year, from 57 per cent the previous year. This is compared with 91 per cent of European investors, up from 84 per cent in 2021 and 63 per cent of North American investors, a decline from 74 per cent the previous year.

Investors are also starting to include biodiversity in their investment approach though Asia is lagging its European counterparts on this front.

Only 31 per cent of Asian investors view biodiversity as central to their investment policy or as a significant factor today, trailing Europe at 57 per cent and in line with North America at 31 per cent.

Implementation of ESG strategies still proves to be challenging for global investors, with the lack of data cited as among the biggest obstacles to decarbonisation and biodiversity considerations.

The lack of internal expertise and lack of capacity and resources are also challenging Asian investors more than those in other regions.

Some 63 per cent of Asian investors also highlighted the lack of global agreement on policies, such as regulation and taxation, to help capital markets direct funds away from carbon-intensive activities and to more sustainable activities as a barrier.

This is followed by short-term costs of decarbonisation (50 per cent) and the reluctance of some corporates to take action on decarbonisation (42 per cent).

Overall, Asian investors would like to see more impact investing offerings related to decarbonisation, more information and education on biodiversity, and asset managers taking an active role over biodiversity loss, said Lucian Peppelenbos, climate strategist at Robeco at a webinar on Monday.

Despite existing challenges, net-zero commitments have been pushed into the mainstream. Nearly half of investors surveyed have made a public commitment to achieving net-zero greenhouse-gas emissions from their investment portfolios by 2050 or are in the process of making this commitment.

Among Asian investors, 31 per cent have made a public commitment to reaching the 2050 net-zero goal while 40 per cent of European investors and 11 per cent of North American investors have done the same.

Institutional investors in Asia expect to divest around 25 per cent of their portfolios from carbon intensive assets in the next 5 years, compared with 20 per cent among wholesale investors.

Meanwhile, thematic investing is the most widely used ESG strategy among investors with 70 per cent currently implementing it as high or core priority.

Impact investing or investing with positive ESG intentions and objectives, is also increasingly being adopted, with 25 per cent saying this is being implemented as high or core priority.

These findings indicate that the availability of funds and strategies offering thematic and impact investing have increased, said Robeco.

On the impact of the ongoing energy crisis on the ESG agenda, Peppelenbos said that there might be an uptick in upstream activity in the short term in order to keep prices under control.

"We hope it's done in a responsible way so that you don't have a lock-in into assets that might be stranded in the future," he said, adding that Robeco is of the view that the world would transition towards a low carbon future.

Active ownership, which includes engagement and voting, is now at the centre or a significant factor in 73 per cent of investment policies, compared with just 54 per cent 2 years ago.

Global investors are adopting a cautious and active ownership approach to investing in oil and gas companies, for instance, with the appetite to divest stakes in such companies expected to increase to 22 per cent in the next 2 years, versus just 11 per cent today.

Meanwhile, net-zero carbon emissions, reducing global waste, halting deforestation and protecting biodiversity are seen as the most crucial environmental engagement themes to focus on in the next 2 to 3 years.

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