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Asia sustainable investment is still marginal

Asia ex-Japan has far fewer sustainable investing assets than in other parts of the world, despite increasing ESG awareness among the region's investment community, according to a recent KPMG report

Currently, around four-fifths of total global sustainable investing assets are concentrated in Europe and North America, the report, co-authored with the Pacific Basin Economic Council (PBEC) and the ESCAP Sustainable Business Network (ESBN), noted.

Moreover, the sums of money committed to sustainable ventures in Asia ex-Japan have remained largely marginal. And even in Japan, the proportion of all managed assets invested in sustainable assets — at around 18% — is far below that of Australia and New Zealand (63%).

In order to meet the UN’s Sustainable Development Goals by the target year of 2030, the UN Economic and Social Commission for Asia and the Pacific has estimated that the Asia-Pacific region will need to spend $1.5trn annually, the equivalent of 5% of GDP.

“The rise in awareness of the urgent need for more sustainable investments has been accompanied by an increased understanding of the vast amounts of money needed to make the world climate-change proof,” George Lam, president of ESBN said in the report.

“Governments will not be able to provision this amount of money through public finance alone and therefore must strengthen their cooperation with the private sector on mobilizing sustainable finance to fill the investment gap,” he added.


Hong Kong leads the way

While Asia-Pacific has yet to embrace sustainable finance to the same degree as Europe and North America, the momentum is strong and several initiatives are under way.

Governments across the region via their central banks are starting to require greater disclosure of climate-related and other environmental risks from financial institutions and listed companies. Japan, Singapore and Hong Kong SAR are currently leading the way, according to the report.

“Sustainability is a key area of focus for boards, investors and the public. We see that Hong Kong has been quick to action compared to other international markets in the region. We also see a rise in the number of companies that are taking ESG factors into account in their investments, ” Andrew Weir, chairman of PBEC and vice chairman of KPMG China, said in the report.

Last month, Hong Kong Exchanges and Clearing Limited (HKEX) said that it will launch a central hub for data and information on sustainable and green finance investments later this year.

“By encouraging issuers, investors, asset managers, market participants and advisors to play an active role in enhancing the sustainable and green finance ecosystem in Hong Kong and the region, [Stage will reinforce] the sustainability of our own market,” said HKEX head of green and sustainable finance, Grace Hui, in a previous statement.

“Our goal is to help issuers raise awareness of their sustainable and green financial products, [while] also offering investors and asset managers easy access to information for their due diligence, selection and monitoring,” said Hui.

In fact, Hong Kong has been the most determined to develop an accountable and transparent ESG regime for investment products sold within its jurisdiction.

For example, last year the Hong Kong Monetary Authority (the territory’s central bank) announced measures to support green finance development, including a common framework to assess the “greenness” of banks, and giving priority in its exchange fund to green and ESG investments if the long-term return is comparable to other investments on a risk-adjusted basis.

Part of the Mark Allen Group.