October's most read: Value over values in ESG for Apac asset owners; Opportunities abound in corporate, EM credit: Thai government pension
Value over values in ESG for Apac asset owners; Opportunities abound in corporate, EM credit: Thai government pension; ESG 'backlash' emerges as fresh challenge for investors; Early-stage sustainable ventures pay off: family office Rumah Group; GIC’s mosaic approach to ESG analysis
Value over values in ESG for Apac asset owners: survey
Asia Pacific (Apac) investors seem to put a relatively higher focus on what ESG can do for investment gains, rather than how ESG investing can fuel progressive output, compared to their peers in North America and Europe.
According to a global survey of institutional investors by State Street Global Advisors, there is a relative lag among Apac asset owners when it comes to prioritising focus on integrating ESG for carbon reduction, climate strategies, and environmental factors; or the development of an internal ESG framework. On the other hand, Apac asset owners are on par with European peers when using ESG to find alpha investments.
Apac investors are still relatively focused on the value aspect of ESG and how they can derive value for the stakeholders, both short- and long-term. While focus on returns may drive the short-term view, value can be exposed over the long-term, so the two approaches are compatible, according to State Street.
Opportunities abound in corporate, EM credit: Thai government pension
The Government Pension Fund of Thailand sees opportunities in the corporate bond and emerging market bond space, as valuations start to improve and bond yields are likely to be higher than expected inflation.
“Unlike the first half of 2022, where there were the worst six months for credit investment since the Civil War…We foresee the future to be more promising,” said Srikanya Yathip, secretary general of the Government Pension Fund (GPF) of Thailand, during the annual Milken Institute Asia Summit recently.
Even though sentiments remain mixed and uncertainties continue, Yathip noted that bond valuations have dramatically improved in the recent quarter despite the tightening macro-economic environment being sequentially negative for credit investments.
“So, we see opportunities arise as positive real yields exist, [given] bond yields are likely to be higher than expected inflation,” she said.
In an indication that ESG is now a mainstream consideration, investors are increasingly concerned about a backlash against climate action and diversity.
As growing populism fuels a reaction to what some see as unnecessarily "woke" shifts in society, some investors fear the movement could threaten the progress already made on issues of diversity, climate action and alternative energy.
Australian investing institutions have a broadly progressive attitude to ESG issues, but they acknowledge that increasing societal strains are likely to lead to a revolt against perceived ‘woke’ shifts.
Family offices and private investment funds have been on the prowl for sustainable businesses, largely in the growth or late stages, to invest in, but there are opportunities to be found among early-stage ventures, according to single-family office Rumah Group.
“We’d love to see more support in the early stages, because private equity (PE) funds are all excited about opportunities within the energy transition, infrastructure and so on. But they’re all sitting there saying ‘give me $100 million, give me a $200 million, give me a half-billion dollar investment’,” said director Thomas Knudsen.
“So I think there is an opportunity there, whether it's family offices, whether funds, to deploy that little bit earlier, which might mean higher risk, but then actually spread the risk on your investments to get that early traction,” he said.
GIC’s mosaic approach to ESG analysis
Sustainable investing is complex and still evolving, but is here to stay, according to speakers at 'ESG: From niche to norm', an AsianInvestor event held in partnership with Natixis Investment Managers in Singapore on Tuesday (October 18).
De Rui Wong, vice president at GIC’s sustainability office, said that GIC’s beliefs on sustainable investments are threefold: a belief in investing in green solutions and transitioning businesses; in constructive engagement over divestment; and that sustainability is nuanced among each sector, region and market.
“We believe that if you merely flatly divest from investments, they may end up in the hands of investors who may not care as much about sustainability issues or helping companies transition,” Wong said during the panel discussion.
He also highlighted that environmental, social and governance (ESG) applies very differently to every region, sector and market, which underscores the need for investors to continuously assess, analyse and update their data sources as they develop their ESG investment strategies.
While Hong Kong fund managers may have welcomed a series of government measures to address the brain drain and bring talent back to Hong Kong, there was disappointment that the long-awaited border reopening between Hong Kong and China was not among them.
“There is keen competition globally for talent and being proactive and ensuring that we are at least as competitive, if not more so, on talent policy is imperative,” said Sally Wong, chief executive officer of the Hong Kong Investment Funds Association (HKIFA).
“The basket of measures announced today demonstrates the government appreciates the urgency and the need to reach out as soon as possible - (it's) moving in the right direction,” she told AsianInvestor.
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