MORE Asian investors are incorporating environmental, social and governance (ESG) standards into their investment appraisal process, Asset Benchmark Research finds.

One in two investors (47%) have incorporated ESG factors when making portfolio decisions, according to local currency bond market investors in a survey conducted in the second quarter. This contrasts to last year's results when just about a third of respondents noted their focus on ESG.

The survey confirms that investment houses are gradually setting internal standards and guidelines for ESG investment.

"We have implemented Stewardship Code as per guidelines issued by IRDAI (Insurance Regulatory and Development Authority) which explains ESG investment," says the chief investment officer in an insurance company based in India.

"ESG investment guidelines are implemented in our credit and equity portfolios," echoes a senior portfolio manager in an international bank based in Singapore.

Increased awareness on sustainability is helping build the momentum around ESG, the survey shows. "We receive more client requests for ESG internal control procedure, and from our perspective we have set up internal monitoring pool that also involves ESG analysis in our investment procedure," says Lawrence Shen, a fixed income analyst at Taikang Asset Management in Hong Kong.

The growing importance of sustainability as part of investing is driving many investors to seek qualified fixed income instruments. "We look at corporate governance of any company we invest in, in utmost detail. The other two factors (environmental sustainability and social responsibility) are relatively lower in the rank as of now due to the limited nature of investable universe," says a portfolio manager in India.

Background

The Asian Local Currency Bond Benchmark Review covers 10 markets including China (onshore and offshore), Hong Kong, India, Indonesia, Malaysia, the Philippines, Singapore, Taiwan and Thailand. It has been conducted annually since 2000. It provides a wealth of data on the product needs of investors and the market penetration of the banks that are active in local currency bonds. It also provides detailed analysis on the investors' buying behaviour when selecting their counterparties, giving unprecedented access into the minds of investors.

The Asset Benchmark Research also conducts an annual benchmarking awards on corporate sustainability – The Asset Corporate Awards. For information, please click here.

To view the rankings of the most Astute Investors in Asian local currency bonds by country, please click here.