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Survey: China AMs rank low for ESG

Two Chinese asset managers were included in a survey of 75 leading firms - and they didn't distinguish themselves, according to a responsible investment report.

China Asset Management was 52nd and E Fund Management was placed last in the survey by Share Action, a UK-based charity that promotes responsible investment.

Neither firm provides details of their ESG policies or processes on their websites, nor did they respond to FSA‘s request for comment before publication.

In the band ranking from AAA-to-E, China Asset Management was rated D and E-Fund Management rated E, the worst category, which denotes “poor management of responsible investment risks and opportunities”, according to Share Action’s criteria.

While Japanese firms led by Asset Management One (27th) put up a more respectable showing, Singapore’s Eastspring, which signed the United Nations-supported Principles for Responsible Investment in February 2018, also floundered in the E band (placed 65th). The firm preferred not to comment.

Asia laggards

The results are perhaps unsurprising. A survey of licensed asset managers by Hong Kong’s Securities and Futures Commission in December 2019 found that only 35% of 660 firms consistently integrated ESG factors in their investment and risk management processes. Also, a Morningstar report last year noted that ESG investment in Asia significantly lagged other regions, while “greenwashing” or providing misleading ESG claims, was rife.

Nevertheless, regulators in Asia, especially in Hong Kong and Singapore, have been encouraging the formation of ESG-compliant funds by setting eligibility requirements and mandating public bodies to invest in them. However, evaluations and allocations tend to be at the individual fund level, rather than the group level.

For instance, Blackrock has two funds that meet Hong Kong’s ESG disclosure requirements, ShareAction ranks the US firm 47th and in the D band, for “showing little evidence to suggest adequate management of material responsible investment risks and opportunities”.

There were also clear regional differences in the survey’s results, with European asset managers ranked in the top 19 positions.

No firm met the so-called  “gold standard” rating of AAA, but Robeco, BNP Paribas Asset Management, Legal & General Investment Management, APG, and Aviva were rated A, “demonstrating strong management of risks and opportunities as well as impacts across multiple responsible investment themes”, according to the report.

Share Action attributed the stronger results from European asset managers to regulatory signals on sustainable finance at the EU level – such as the EU’s sustainable finance agenda – and the country level – for example, the Dutch climate agreement.

The highest ranking North American firms were Canada’s BMO Global Asset Management (20th) and Chicago-based Nuveen (21st ).

The results were based on a questionnaire, with scores assigned to individual answer options, with some questions having larger weighting. The weight of individual sections — responsible investing (36%), climate change (28%), human rights (19%) and biodiversity (16%) — was determined by the sum of the scores assigned to each question in that section.

Share Action collected the information between July and October 2019, and 92% responded to the questionnaire. For the 8% of asset managers who chose not to participate — which included E Fund Management — publicly available information was used and results made available for review.

It was especially critical of poor reporting of ESG-related engagement with companies they invest in, a low proportion of board-level oversight for responsible investing and inadequate disclosure of voting records.

The combined AUM of those managers with a D or E rating was $36trn, and represented about half the number of firms surveyed.

“The majority of asset managers demonstrate a substandard approach to responsible investment,” concluded the report.

Number of asset managers in each rating band, sorted by region

Source: ShareAction, 2020

Part of the Mark Allen Group.