APAC investors: The steady rise of ESG

What is the attitude of APAC investors towards ESG, and what are they looking for from borrowers and issuers? Read our summary of investor insights to learn more.

01 Nov 2022 . 2 min read

We regularly survey and engage with ESG investors from across the globe – see our ESG Investor Insights Quarterly and our What ESG Investors Want Webinar Series – to help companies, and in particular issuers, better understand investors and their expectations.

In this article, we reflect on our recent APAC Investor Survey, to which 70 Asian investors responded. We explore their views on various ESG aspects and how they and their investment companies are approaching recent developments.

Key Takeaways

Evolution since 2021

Asian investors are fast becoming more ESG-mature: 65% of the Japanese investors in our survey declared to systematically include ESG issues in their investment decision (ESG Integration) – this compares to only 25% in 2021. We have observed the same trend regarding borrower and issuer engagement, with 60% of Asian investors – especially Japanese accounts, banks and insurers – saying in our survey that they proactively seek to have an ESG conversation with borrowers (compared to 56% in 2021).

ESG reporting on the rise: 51% of Asian investors now publish an ESG report (versus 36% in 2021), driven by a significant increase among ex-Japanese investors (47% in 2022 versus 8% in 2021). At the same time, the percentage of ex-Japanese investors measuring their operational and/or fund carbon footprint has jumped from 8% in 2021 to 42% in 2022.

ESG integration

APAC banks and insurers are more advanced in their ESG integration journey compared to the rest of the APAC investor community, highlighted by banks’ and insurers’ more proactive borrower engagement, detailed ESG reporting and overall rather more ambitious and complex ESG strategies. Their ESG-lead could be explained by both their size and global geographical footprint.

Climate

Differing views about the future of the ‘greenium’: APAC investors are split with regards to the future trajectory of the greenium, with 40% saying they expect greeniums to grow, while another 40% predict the price advantage for green issuances will tighten, and 20% think it will remain the same.

Barriers to ESG investing

Greenwashing a significant concern: 50% of Asian Asset Managers expressed their concern in our survey about greenwashing, with 54% of Asian insurers pointing to the undiversified ESG supply as the main challenge.

Product development

There’s an appetite for ESG securitisation products: 35% of the Japanese investors surveyed have said they are interested in ESG-linked Residential Mortgage-Backed Securities (RMBS), while 24% of their Asian counterparts have appetite in ESG-linked Asset-Backed Securities (ABS).

Hesitation towards pricing of sustainability-linked products: A vast majority of Asian investors (89%) are currently not willing to consider a two-way pricing mechanism for sustainability-linked instruments, with particular resistance coming from Japanese and insurance accounts.

Exclusion policies

79% of insurers declared they have ongoing internal discussions with the aim to expand their exclusion policies; weapons and adult entertainment are the most cited sectors excluded from investments. While nuclear power generation appears to be captured more often by exclusion policies than the Oil & Gas sector (36% versus 25% and 11%).

To see the full breakdown of questions asked, and results, click the following link (PDF, 220KB). We’ll provide regular updates on frequently asked questions posed by investors, to keep you up-to-speed with their most current views. So, please regularly check our Insights Hub for updates.

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