Attention to ESG as a mainstream risk metric has spread from a relatively small group of companies and investors, to all market participants. With sustainability investment in Asia anticipated to grow to over USD$2.0 trillion by 2020, representing around 10% of regional investments, many firms are now embracing ESG – investors are increasingly factoring ESG risk into their decision making processes, while companies are beginning to use ESG to improve their risk management functions, increase investor confidence and improve their market transparency.
ESG is a risk that has potential to be ‘unseen’ from a measurement point of view. Companies and investors that have a process for measuring and understanding ESG risk, and the degree to which that risk is being managed, are likely to have a more accurate understanding of companies as a whole, and subsequently, an enhanced view of corporate risk.
Across Asia, consideration is increasingly being paid to local ESG risks as factors such as ethical business conduct, executive remuneration and employee rights begin to have a more visible impact on financial performance, not least, intangible assets such as brand, reputation, talent attraction and the perceived quality of management.
Local controversies, combined with market mechanisms and the availability of robust ESG information are driving local companies and investors to embrace corporate sustainability. More and more firms are reporting their risk management credentials, or looking to ESG factors as a means to improve and differentiate their portfolios.
As markets look beyond traditional metrics to identify companies that that will continue to perform, ESG risk is becoming firmly embedded in the decision making of leading Asian firms, and their global supply and investment counterparties.
The ESG-Connect portal now provides an important ESG reference point for Asian markets and credible data and content to track the performance of sustainable investments, and leading Asian companies.