Asian asset managers fall behind European peers in their environmental, social and governance (ESG) practices, according to the World Wildlife Fund (WWF). In its 2021 report, the WWF says that Asian asset managers fulfil just 43% of its RESPOND (Resilient and Sustainable Portfolios that Protect Nature and Drive Decarbonization) criteria, suggesting their portfolios may be at greater risk from climate change and natural capital loss. By comparison, Europe’s asset managers fulfil an average of 72% of the criteria.
Among the Asian asset managers included, Japanese asset managers are leading the pack when it comes to responsible investment practices.
The report looks at the performance of 30 asset managers across a six-pillar framework: purpose, policies, processes, people, products and portfolio. The report includes eight asset managers headquartered in Asia together with 22 European asset managers.
WWF’s analysis finds that both groups continue to take important steps to build their responsible investment capabilities. In particular, all asset managers acknowledge their role in driving sustainable development and 29 have published overarching responsible investment, engagement and voting policies.
Twenty-nine asset managers carry out research to identify ESG trends, apply ESG screens and proactively monitor the ESG performance of portfolio companies. Additionally, all 30 asset managers define who has oversight of responsible investment and its implementation and have dedicated ESG specialists in their teams.
The report highlights opportunities for Asian asset managers to improve transparency around responsible investment activities and to reinforce their active ownership practices. For example, neither of the two Chinese asset managers disclose information regarding their engagements with investee companies over ESG issues, and only four of the Asian asset managers (all Japanese) disclosed their roles in collaborative engagement initiatives. Of the Asian asset managers featured, only one reported support for ESG resolutions and just two disclosed their full proxy voting records.
As ESG integration becomes the norm in asset management, expectations from asset owners, regulators, and civil society, including those in Asia, for asset managers to better address climate change and nature loss will keep growing, WWF says. This is due to stakeholders looking increasingly to their asset managers to effectively manage ESG risks, while driving real world tangible change through their investments and stewardship activities. Consequently, this year and beyond, Asian asset managers will need to step up their ambitions and practices to match current best practices in responsible investment.