More than 40% of institutional investors in Asia say they are being held back from an even larger commitment to environmental, social and governance (ESG)-based investing because of a shortage of expertise or qualified staff, according to the latest HSBC’s Sustainable Finance and Investing Survey 2021*.
The figure was up from 26% in 2020, and is currently the most common reason Asian investors give for not pursuing ESG investing more broadly and fully.
By country or territory, the talent shortage seemed less of an issue in Hong Kong (where 27% of issuers say there is a skill deficit) than in China (43%) and Singapore (41%).
Apart from the talent shortage, investors in Asia also faced a lack of comparability of ESG data across issuers, regulatory or legal constraints and a lack of attractive investment opportunities (see chart below).
Jonathan Drew, head of ESG solutions at HSBC, said in the press release that sustainable finance and investment was a huge untapped opportunity for Asian corporates and investors, who could use ESG to differentiate themselves and drive growth.
“It is also critical in ensuring the region – which is among the most vulnerable to the climate crisis – transitions to a path of sustainable, low carbon, economic growth,” he noted.
The survey also showed that only 39% of investors in Asia had a firm-wide policy on responsible investing or ESG issues. This compares with 91% and 72% in Europe and the US respectively. However, 72% of respondents in Asia said they were paying greater attention to ESG issues compared with last year, indicating greater prioritisation among investors in the region.
Nevertheless, the region is currently working on new mandates to enhance the ESG investment scale and capability.
In June, Korea Post hired Mirae Asset Global Investments, KB Asset Management and Heungkuk Asset Management, for its first ever socially responsible bond mandate. Most recently, Taiwan’s Bureau of Labor Funds was also looking to hire six local asset managers for a NT$48 billion ($1.72 billion) corporate social responsibility absolute return domestic investment mandate.
"There is absolutely a war for ESG talent in Asia Pacific, particularly in Singapore where the regulator has a strong focus on its green agenda. It is also a global challenge right now," Danielle Welsh-Rose, ESG investment director for Asia Pacific at abrdn (renamed from Aberdeen Standard Investments), told AsianInvestor in an email response.
The $606.7 billion asset manager in July established abrdn Sustainability Institute in Asia Pacific, which is supported by more than 50 ESG experts globally.
"We’re hiring four additional dedicated sustainability roles in the second half this year across investments and risk & compliance," she noted.
The survey also provided a glimpse into regional issuers’ appetite for sustainable finance where sustainable debt and infrastructure projects received the most enthusiastic welcome.
Asian issuers have been increasingly attracted to the green and sustainable debt markets in the past few years, providing some impetus to record year-on-year issuance growth globally.
By the beginning of June, Asian issuers – led by Chinese and South Korean public and private sector borrowers – had issued a record $69 billion of green and sustainability-linked bonds, the survey showed.
On the investor side, this interest extended to sustainable energy projects, in which 63% of Asian investors expressed an interest in investing and some 18% are already doing so.
Investors reserved the most intererst for: solar power (30%); water and wastewater infrastructure (27%); wind power (21%); smart cities and grids (20%); and electric vehicles and transport (20%) (See chart below).
Despite the growing interest, however, the overall level still lags the global average.
*: The HSBC Sustainable Financing and Investing Survey 2021, published on September 20, is an annual global survey of 2,000 capital market issuers and institutional investors. Respondents were split evenly between 1,000 issuers, from across 19 industries, and 1,000 institutional investors, including asset allocators and asset owners. The survey was run during May and June.