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Responsible investment practices in Asia have generally been viewed as behind those of their global counterparts. This perception is typically linked to historical obstacles, including a restricted comprehension of ESG (Environmental, Social, and Governance) concerns, challenges in incorporating them into investment strategies, and the need for standardised and easily comparable ESG data.
However, things are changing, and Columbia Threadneedle Investments observes a rising appetite for responsible investing in Asia.
“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,” says Tom Barron, Senior Associate, Responsible Investment at Columbia Threadneedle.
Asian policymakers support the change
Barron further points out that Asia, after Europe, has experienced significant growth in sustainable finance policy instruments, with Asian regulators employing various measures to promote sustainable finance. This evolution has transitioned from encouraging voluntary corporate ESG disclosures to enforcing their mandatory adoption.
As assets under management dedicated to responsible investment increase, regulators have introduced regulations for ESG fund disclosures and labels to address greenwashing. Additionally, Columbia Threadneedle highlights that Asian policymakers have concentrated on developing sustainable and green finance taxonomies and implementing and updating stewardship codes.
“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,” says Barron.
