Study: Brand and reputation key driver for APAC investors to include ESG in decision making

Brand and reputation is a key driver for investors to incorporate environmental, social and governance (ESG) considerations into their investment decision making, according to a study titled "The ESG Global Survey 2021" by French bank BNP Paribas. Globally, brand and reputation (59%) is the main driver for ESG investment in 2021, indicating that investors are trying to mitigate risks by investing with companies that align with their values, as well as generate financial value. This is a shift from 2019, where 52% of investors cited improved long-term results as a key driver for ESG investment. 

The second top motivation for ESG investing in 2021 is external stakeholder requirement (46%) followed by improved long-term returns (45%). The study surveyed 356 asset owners, official institutions and asset managers around the world, including 110 from APAC, 33 of which were from Singapore.

According to The Business Times, 76% of Singapore investors said that protecting their brand, reputation and mitigating headline risk is their key driver for ESG investment, followed by improved long term returns (58%) and external stakeholder requirement (39%). The study also noted an increased talent pool had the highest appeal among APAC investors (19%), notably in Singapore (33%).

Among APAC investors, 57% said cited brand and reputation as a key driver, followed by a tie between external stakeholder requirement and improving long term returns (45%), according to The Business Times. 

Additionally, the study revealed that ESG is maturing quicker than predicted. The 2019 survey saw zero investors foreseeing a future where 75% or more of an investor’s portfolio would integrate ESG by 2021. However, this year's study shows that 22% of investors surveyed integrate ESG into at least 75% of their portfolios, 13% of whom integrate ESG in all their portfolios. According to BNP Paribas, these numbers are predicted to grow in the next two years.

Regionally, APAC is home to the largest percentage of investors (82%) with ESG applied to less than half of its portfolio. This is largely driven by 75% in China and Hong Kong SAR who have less than 25% of their assets incorporating ESG.

APAC is followed by North America (71%), and Europe (50%). The UK is home to the highest percentage of investors incorporating ESG across their whole portfolio (30%).

Data challenges remain a key barrier for ESG integration for investors in the APAC region and around the globe. Nearly half of APAC investors (48%) surveyed cited challenges around data quality and consistency as the main barrier for ESG integration, followed by inconsistent quality of data across asset classes (46%). Globally, 59% of investors surveyed cited issues related to data as a top impediment to integration, compared with 66% who said the same in 2019.

Singapore's large institutional investors and the central bank have been spearheading the need for greater adoption of ESG over the past few years. The Monetary Authority of Singapore (MAS) launched several initiatives to accelerate green finance in Singapore through improving disclosures and fostering green solutions earlier this year. The Green Finance Industry Taskforce issued a detailed implementation guide for climate-related disclosures by financial institutions, a framework to help banks assess eligible green trade finance transactions, and a whitepaper on scaling green finance in the real estate, infrastructure, fund management and transition sectors. 

Separately, PwC Singapore said earlier this year that it is investing SG$50 million over the next five years to launch an ESG Centre of Excellence to build up its ESG capabilities. It is part of its global strategy known as "The New Equation", that aims to address the major challenges shaping today's world including technological disruption, climate change, fractured geopolitics, social tension and the continuing needs organisations are grappling with. PwC also plans to beef up its new hires and the skills enhancement of its partners and employees, including in the area of ESG.

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Photo courtesy: 123RF

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