Asia’s Next Top Trend: Investing in the “E” in ESG

There’s a growing opportunity for ESG outperformance in Asia that you shouldn’t miss.

Climate change is a serious problem, but governments, organisations, and individuals are increasingly trying to mitigate and counter its effects. In 2018, three border collies were tasked to run through damaged Chilean forests with special backpacks that released native plant seeds to rebuild the forest. In Asia, we might not have tree-planting pups, but we do have green tools to combat climate change. For example, Korea and China are world leaders in electric vehicles and in the renewable energy sectors. These innovations will be necessary, especially since climate change is expected to hit Asia the hardest. The urgency of this issue suggests there’s going to be greater opportunities for ESG outperformance in Asia.

With Asia’s infrastructure needs estimated to exceed USD26 trillion by 2030, now’s the time for investors to participate in the region’s “green infrastructure” push. Looking at the various ESG investing opportunities, should we only cultivate our investments in sectors or companies that have high ESG ratings? Not necessarily!

Beyond good ESG ratings, we can also look at companies that are transitioning and have intentional strategies to become more sustainable. There are many ways of evaluating ESG risks and you can think of them as gardening tools for growing your ESG portfolio. With the right tools in place, you’ll be able to nurture a stronger garden instead of pruning all risks blindly. It’s also important to assess a company’s level of preparedness against risks. Won’t you be more assured of the safety of your garden if it has a fence around it to guard against pests?

With Asia’s unique mix of strong economic growth and policy support, coupled with rapid wealth accumulation and rising ESG investing opportunities, there is potential for ESG outperformance. For investors, this might be the time for them to sow their seeds early and wait for the harvest.

If you want to learn more about ESG investing, read our thought leadership article on Why Asia offers the opportunity for ESG outperformance.

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