Hortense Bioy, Morningstar
While the lack of quality ESG data in Asia is viewed as a challenge by some asset managers, industry players should consider this an opportunity to differentiate themselves in the market, according to Hortense Bioy, director of sustainability research for EMEA and Asia-Pacific at Morningstar.
“It is viewed as a negative because it is hard to do proper analysis if you do not have the data you need.
“But at the same time, you can see it as a key differentiator – if you are able to get the data,” Bioy said at a virtual media briefing yesterday.
Bioy highlighted the importance of engagement and stewardship, as these should help firms obtain quality information not necessarily made available to everyone.
“It is very much a quest towards getting the best information and data, and for that, you need to engage with the company. So those portfolio managers that have the resources to engage with companies to obtain the data can get a competitive edge.
“They go after those market inefficiencies. When everyone has access to the same data, there are less inefficiencies to take advantage of,” she said.
Based on Morningstar analysis, fund managers who make use of proprietary ESG information usually are “leaders” in the ESG space, according to Wing Chan, Morningstar’s director of manager research practice for EMEA and Asia.
“In Asia, leaders in the ESG space have their own way of collecting this data. They are able to speak with company management and try to understand their ESG practices and that gives them an edge,” he said during the briefing.
The ESG funds space in the region has become more competitive, with more ESG funds being launched in Asia. Currently, there are now 279 ESG-focused or sustainable funds sold in the region, with assets growing to $23bn from $13bn earlier this year, Chan said, citing Morningstar Direct data.
“That represents a massive growth,” he said, noting that the data only includes locally-domiciled products. Many of the other ESG funds being distributed in the region are also Luxembourg-domiciled Ucits funds, he added.
ARE THIRD-PARTY DATA USEFUL?
Some industry players have previously noted the importance of having their own data, as ESG ratings provided by third-party providers are not consistent with each other and are often backward-looking.
While acknowledging that ESG ratings provided by third-party providers are not consistent, Bioy believes that fund managers can still make use of the information provided by these companies.
“I don’t think we will ever get consistency across ESG ratings. The harmonisation and the standardisation of company data disclosure will make ESG ratings more robust. However, it’s not going to lead them to necessarily determine whether a company is good or bad.
“When making use of these ratings, fund managers don’t use the headline rating. Instead, they use the data underneath those ratings, as they have their own view of which factors are material to a particular investment universe,” she said.