Asia continues to lag behind others in sustainability practices with many investors still preferring to test the market rather than fully integrate, investor services provider IQ-EQ’s Jimmy Leong told finews.asia.
While major institutional investors such as pension funds or sovereign wealth funds are already aggressively implementing new investment and disclosure processes relating to environmental, social and governance (ESG) factors, others are still unconvinced about wholesale conversion.
«Sustainable investing in Asia lacks integrated lens,» said Jimmy Leong, IQ-EQ’s chief commercial officer for Asia, in a conversation with finews.asia.
«There’s always been a mindset of separating it from traditional investing or business. Even some of the large family offices I’ve dealt with, they tend to just test the market with a separate portion of their assets.»
Top ESG Hurdles
Leong attributes the lack of integration to the knowledge gap in Asia, which is relatively wider than its counterparts in Europe or the U.S. Other regional shortcomings he highlighted include the lack of data availability, lack of standardization of regulations and lack of suitable benchmarks for Asia-centric fund performance.
Still, Leong believed that the outlook remained positive for sustainable investing in Asia with increasing pressure not only from regulators but even investors.
«There’s no turning back,» he said. «Traditional fund managers will have no choice but to factor in ESG into their investing because of disclosure requirements.»
China to Lead
Within the region, China’s role in the success or failure of sustainable investing is oft-cited as a critical factor due to the scale of its economy and capital markets but transparency continues to be a major headwind. Leong believes that this is set to change.
«In some of our actual dealings in China, the limited partners are the ones saying that they need ESG disclosures in their reporting. It’s quite surprising but given that there is a lot of mostly institutional foreign investments into China, it will have to speed up that process,» he said.
«I think China is committed to achieving a green economy. I think China’s going to lead the pack, in my opinion, given the sheer size of its economy.»
Green Washing Risk
Not unlike other markets, Asia also suffers from the risk of green washing and Leong saw a rush of new product supply in mid-2020.
«With the ongoing Covid situation, investor interest in sustainable investments have obviously increased significantly,» he said.
«In Asia, I’ve seen more and more ESG-related products and fund managers, especially since the second quarter of last year. Everybody claims that want to get into space. But not all of them are true ESG offerings. For some of them, it's a marketing strategy.»
