ESG in APAC increases more than any other region

Environmental, social and governance (ESG) integration in Asia-Pacific (APAC) has grown more than any other region, jumping to 88% from 81% in 2021, according to a new study by Capital Group.

Capital Group surveyed 1,130 global institutional and wholesale investors, including pension funds, family offices and insurance companies, as well as fund of funds, retail/private banks and financial advisers, from 19 markets around the world.

It found ESG in the Asia-Pacific region had grown from 81% last year to 88% this year while the percentage of APAC investors who remained on the sidelines had decreased from 16% to 10% and non-adoption had fallen from 3% to 1%.

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Looking globally, two-thirds of investors preferred to use active funds to integrate ESG, with 80% of investors gaining ESG exposure through equities compared to 58% through bonds.

Among those surveyed globally, meeting client needs (27%) and making a positive impact (25%) were the most-cited motivations for adopting ESG. APAC investors were most driven by making a positive impact (23%).

Compared to North American and European respondents, twice as many APAC investors also attached most weight to improving performance (21% vs. 10% in North America and 10% in Europe) as a driver for ESG adoption.

Capital Group global head of ESG, Jessica Ground, said: “ESG adoption rates appear to be firmly embedded among professional investors globally, with a growing preference for active managers to make the critical investment decisions.

“This preference underscores the complexity of assessing ESG issues and that reducing them to a single ESG score cannot capture nuanced company evaluations.

“Investors are hence turning to active managers that can focus on deep proprietary research, robust monitoring systems and engagement to analyse companies.”

ESG adoption was now widespread, according to the report, with the proportion of ESG users jumping to 89%, up from 84% in 2021.

The report’s release followed the launch of BlackRock Australia’s iShares ESG Model Portfolios for Australian investors.

The ESG Portfolios would apply BlackRock’s multi-asset strategy capabilities and would be implemented using iShares ETFs and BlackRock index funds, targeting affordable price points. The ESG Portfolios were currently available on Praemium and were expected to be available on additional platforms later this year.

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