Just how do external managers integrate with an in-house ESG framework? Discuss
When it comes to integrating ESG, it's all about collaboration, data consistency and choosing the right external manager, panellists told Asianinvestor's Mandating Change Week event.
“About 25% of our assets are outsourced managed. Internally, we basically assess ESG criteria within the investment program aligned with sustainable investment outcomes. So that fits under our general purpose as an organisation,” said Mark Konyn, group chief investment officer at AIA.
Although the insurer still manages the pool largely by themselves, he said he believed collaboration from external managers played an important role over the long term.
“We have a number of very significant relationships with external managers and we share with them our [ESG] selection criteria, our inclusions and our exclusions, and we expect them to adopt the same criteria that we use,” he said.
But this journey, he said, is still evolving.
“In terms of what we expect from our external managers, it's not clear to me today how they fit in with [our] structure,” he noted.
“They (external managers) tend to be product specific whereas a fund manager is offering a range of products, some of which are aligned with the ESG outcomes and others are not,” he added.
He said the group expects to see principles embedded in their asset managers' and partners' processes, regardless of what product they're managing.
“When we look at external managers, we're still figuring out how that integrates with the process, because clearly it's not seamless,” he said.
BUSINESS MODEL RISK
Of all the factors in ESG integration, he emphasised the importance of taking a closer look at risks to the business model when processing.
He said he believed that when people talk about sustainability from an investment perspective, it's really about retaining the integrity of the business model.
"Typically in a calendar year, we go out three or four times to our investee companies and we talk to them in relation to particular themes that we think are pertinent and relevant, and through that we're building an understanding clearly of what's going on, particularly in Asia where a lot of our investments are focused,” Konyn said.
DATA MATTERS
Other panelists including Wilson Wei, head of ESG research at Chinese fund house E Fund Management, said better-integrated ESG data could help both asset owners and asset managers stay on the same page.
“I think the primary problem is [ESG] data,” Wei said. “Companies should disclose their data history.
"ESG is becoming more popular in China and we can see that there are more investors - especially institutional investors and data providers [joining the market] - who will be working together to solve this puzzle,” he said.
Like many of their rivals, the Chinese firm is building an in-house ESG data platform which collects third party data and news, and also integrates in-house comments and ratings. As of June, the Chinese asset manager had $385 billion assets under management.
ALSO READ: The $4 trillion club: how the world's biggest investors are driving clarity on ESG data
According to a newly released report by Capital Group, Asia Pacific investors identified concerns over a lack of robust ESG data as one of the main barriers to ESG adoption, attributing a similar level of importance to the issue as global respondents. Almost half of Asia Pacific investors also agreed that a lack of product innovation was holding back greater adoption of ESG.
Join our Mandating Change Week from October 26 to 28, 2021. Click here to register.
Other highlights from the event: Nippon Life prioritises ESG engagement over divestment