Singapore serves as a good example for the rest of the world in terms of ESG disclosure requirements, PGIM’s global head of ESG, Eugenia Unanyants-Jackson, said during a recent interview with FSA.
Globally, investors and other stakeholders have highlighted inconsistent disclosure requirements as one of the biggest challenges when it comes to ESG and have called for greater harmonisation.
In December last year, Singapore outlined proposals that would see listed companies report on 27 core ESG metrics. Each metric is quantitative, has a description and is mapped against globally-accepted sustainability reporting frameworks.
The list is not meant to be exhaustive and the idea is that companies would also make additional disclosures where necessary, but it does aim to address one of the key issues facing investors: the lack of standardised reporting on ESG.
Unanyants-Jackson says she is a fan of the initiative and said that it is applicable elsewhere.
“If any company tries to meet every voluntary or mandatory reporting regulation in Asia, Europe and the US, they probably need an army of accountants, lawyers, data collectors, et cetera,” she said.
“That is why I think the Singapore effort is so good because it’s simple. Just produce me those 27 or so data points…but by doing that essentially the companies will put in place the necessary processes to be able to expand that and collect other data.”
Unanyants-Jackson said that contrary to popular belief, Asia was in many respects ahead of the US in its ESG journey, albeit it still lagged Europe in most areas.
She pointed to the fact that Hong Kong already issued guidance, first promulgated in 2019 and updated two years later, regarding the labelling of ESG funds, whereas the US Securities and Exchange Commission (SEC) only looked at this issue earlier this year.
“I would say that Asia and the US are pretty much at the same standing in terms of the advancement of ESG and I would say from a regulatory perspective, Asia is further ahead,” she said.
She added that the level of disclosure depended more on the type of company rather than where it located.
“Data is really good or poor depending on the size of the company…depending on whether they are equity issuers, whether they are in public markets or the private markets rather than their regional positioning. Regional is secondary to those factors,” she said.
With regards to the SEC’s proposals, Unanyants-Jackson said that she welcomed the proposals, albeit with a few caveats.
Under its proposals, the SEC is seeking to draw a distinction between ‘integration funds’, ‘ESG-focused funds’ and ‘impact funds’.
An integration fund is defined as one that considers one or more ESG factors alongside other non-ESG factors but generally gives ESG factors no greater prominence than other factors in its investment selection process.
An ESG-focused fund focuses on one or more ESG factors as a significant consideration in its investment selection process, while impact funds comprise those aiming to achieve a specific ESG impact.
Unanyants-Jackson reckons that the integration fund category should be scrapped as it would apply to the vast majority of funds. Similarly, she thinks that the definition of ESG-focused funds is too broad given that it would apply to any fund that has exclusions.
“We don’t think that’s right and we think that actually will create more confusion; the potential for greenwashing,” she said. “What we proposed is actually very similar to what Hong Kong has done, which is that you should only be able to call yourself an ESG-focused fund and have ESG in your fund name if ESG is part of the principal investment strategy of the fund.”
