Anubhuti Gupta, Rosenberg Equities
Editor’s note: this article was first published on ESG Clarity Asia
With more ESG products being offered in the market in response to client demand, greenwashing has risen to become an unwanted consequence, according to Anubhuti Gupta, head of Investments for Asia-Pacific at Rosenberg Equities, Axa Investment Managers’ quantitative franchise.
“The lack of standard definitions, wide range of investor preference and the sheer breadth of the ESG space pose challenges to investors to separate the wheat from the chaff,” Gupta said in a virtual media briefing.
In response to greenwashing, Gupta shared ways of how investors can identify “genuine” ESG investments.
“A few things that investors can look out for in their manager is a clear articulation of the ESG strategy and philosophy and how that actually translates into the company policy and investment strategy,” she said.
Investors can also look at whether their managers have been investing resources in ESG, which include hiring dedicated ESG analysts and experts, data sources, as well as the training they provide internally and externally to raise awareness.
“These can be a good gauge on how serious a company is taking its ESG commitment.”
For managers, Gupta added that the key to preventing greenwashing is the measurement and reporting of relevant ESG key performance indicators for a particular strategy.
“The KPIs should be relevant and measured in a transparent and accurate way, and then reporting them regularly are very key.”
As an example, for Covid-19 bonds, Axa IM has developed an investment framework that expects transparency from issuers around how proceeds will be used to support their response to the pandemic, she said.
“We call for a commitment to outcome and impact measurement,” she said.
ESG OPPORTUNITIES
Covid-19 has accelerated the demand for ESG investing, especially since they have become more resilient in the uncertain market conditions caused by the pandemic.
For example, stocks and bonds of companies with high ESG ratings performed better during the market selloff in March last year compared to those with lower ratings, according to Gupta.
Demand has also increased as more investors are looking at investing in companies that have efforts to combating climate change. There is also fresh attention toward tackling social issues, such as public health, human capital management and societal inequalities.
But while ESG can mitigate risks, Gupta believes that it is also about seizing opportunities.
“We believe investors can drive positive social outcomes and generate robust long-term returns through investments in different asset classes and active ownership and engagement,” Gupta said.
Examples of these are thematic and impact strategies dedicated to carbon reduction, which provide attractive value propositions for investors, according to Gupta.
“From a sector perspective, renewables continue to be attractive.
“We also see the nascent Covid-19 bonds market as a potential new area for impactful debt issuance,” she added.
Investors can find these ESG opportunities in Asia. For instance, China’s commitment to combat climate change is creating new investment opportunities in the renewable energy and EV ecosystem, while Singapore launched a $2bn comprehensive multi-pronged green finance programme to accelerate the growth of green finance, Gupta said.
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