For asset owners and managers, ESG investing is no longer a question of if or even when, but how. As the world looks to counter climate change by setting net-zero targets, investors are increasingly being asked how they are decarbonizing their portfolios and supporting industries in their transition to a low-carbon economy.
Critical in supporting this drive to embrace sustainability and ESG practices is clarity around frameworks and regulations. Aiming to better understand how asset owners and managers are navigating the lack of a common set of standards and the proliferation of non-standardized ESG data in the market, The Asset Events+, in association with BNP Paribas, recently organized an in-person roundtable discussion in Singapore.
Speakers shared their views on the topic, "ESG regulations and frameworks: Implications for asset owners and managers", with several of them seeing current developments as a watershed moment for the region.
“Regulation is generally a positive for the industry as it builds trust with our clients. The question is around this rapid growth of regulation and how interoperable it is,” says David Smith, senior investment director, Asian equities, abrdn, at the well-attended gathering. “You don’t want a situation where your fund counts as a sustainable fund in one jurisdiction but not in another location.”
Insightful discussion: Industry experts share their views on ESG investing and regulations in Asia at an in-person forum hosted by The Asset Events+, in association with BNP Paribas, in Singapore.
This sentiment is echoed by his fellow panellists who see ESG frameworks and regulations as a step in the right direction for the industry.
“ESG regulations are fundamentally aimed at addressing disclosure and transparency, that’s the goal. They are all coming from it at different angles. The goal is being transparent about what you do and let the market decide if this is a robust approach,” explains Jenn-Hui Tan, global head of stewardship and sustainable investing at Fidelity International. “The approach is not try and meet every regulation. You need to figure out what your own core approach is and match that with the different regulations that are coming out.”
“A lot of regulations in ESG now are addressing concerns around greenwashing. Regulators are concerned whether a consumer of a financial product is getting what they expected when they bought it,” highlights Eric Nietsch, head of ESG, Asia, at Manulife Investment Management.
Other speakers note that any ESG regulations applied in Asia should consider the unique complexities of the region. “I think for this region it’s important for us to work out the transition financing terminology and taxonomies around that because it’s important for us to allocate capital to those industries in Asia who want to make a change. If we don’t do that, we don’t make that much of an impact,” says Thu Ha Chow, head of fixed income, Asia, at Robeco.
In addition to understanding ESG regulations and frameworks, creditable ESG data continue to be a challenge. “Last year, we did a survey on asset owners/managers and 80% of the participants said they had trouble integrating ESG into their organization because of lack of standardization of ESG data,” shares Nadim Jouhid, head of investment solutions, Asia-Pacific, at BNP Paribas Securities Services.
Lively exchange: Speakers delve into the nitty-gritty of ESG regulations and frameworks.
Nevertheless, there is a solid drive from stakeholders including bond issuers to improve the quality of disclosures for sustainable fund-raising exercises. “In the GSS bond space, we already see a huge difference in the disclosure coming from the green bond frameworks and also the hiring of second-party opinion providers. The amount of disclosures we see in places like Europe is really ahead,” says Sylvia Chen, senior sustainable officer at Amundi.
However, institutional investors aren’t waiting for the ESG frameworks to catch up. Says Stephen Beng, head of ESG strategy at Phillip Capital Management: “The current urgency requires as to go forward and get on with our ESG investing. We went in and came up with our own method of measuring outcomes that we want. We will pass 2030 if we wait for uniformity of data and regulations to catch up with us. Key thing is to get started already.”
Going forward, education and engagement will continue to play key roles in understanding ESG regulations and frameworks as there are several details that need to be explained further.
“It’s very difficult to understand which ESG approach is the right one. Ideally, we could go to the framework, but there isn’t a standard framework and we don’t know if we are actually looking at the same foundation especially for social factors. It’s going to be different from different asset owners in different parts of the world,” warns Min Axthelm, director of investment research at Endowus.
For more information about this event please go here.
