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Asia not as convinced with ESG-returns link

Nearly half of all investors globally recognise sustainable investing metrics as a driver of long-term financial returns, but Asia lags, according to a new survey by HSBC.

Nearly half of all investors globally recognise sustainable investing metrics as a driver of long-term financial returns, as reported by FSA sister publication ESG Clarity.

The HSBC research, entitled ESG Moves Mainstream, found that 61% of investors and 48% of issuers now cite financial returns as the top driver of their ESG decision-making.

However, wide geographical differences exist. Among issuers, Europe (87%) and the UK (87%) set the pace, particularly among corporates with over $10bn turnover. Hong Kong registers 13%, followed by the US at 21%. The results for Hong Kong are similar to those found in a study conducted by KPMG China, which showed that only 37% of Hong Kong-listed companies have integrated ESG issues into strategic planning, as reported by FSA.

For investors, the widest disparity exists between Europe (85%) and Asia (40%), according to the HSBC report.

The research was conducted through direct interviews with 1,731 global participants, including 868 investors and 863 issuers, over a five-week period concluding at the end of June 2018.

However, despite the widespread recognition that ESG metrics have an impact on performance, fewer than 10% of those polled said they held dedicated ESG investment funds. And of those investors who don’t currently hold dedicated funds, 58% said the lack of consistency in definitions prevented them from doing so.

In a media statement accompanying the report’s findings, Daniel Klier, HSBC’s group head of strategy and global head of sustainable finance, said investor concerns about a lack of standardised definitions have been noted by the market and action is imminent.

“The market is now looking to regulation to provide clarity and definition, especially as inconsistency of definitions is an issue for all,” he explained.

“With the providers of capital looking for enhanced disclosure, and the Task Force on Climate-related Financial Disclosures (TCFD) providing a framework for doing so, implementing the recommendations is now a pressing global priority.”

Klier added, however, that the broader investor recognition of a link between ESG and financial returns was encouraging.

“This shift towards prioritising financial returns illustrates investor engagement has improved and that market forces are encouraging behavioural change. Put simply, ESG, climate finance and risk management are moving mainstream.”

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