The Covid-19 pandemic has exposed a wealth of interconnections – between ecological and human wellbeing, between economic and environmental fragility, between social inequality and health outcomes, and more. The consequences of these connections are now filtering through, reshaping our society and economy.
In this setting, the need to integrate environmental, social and governance (ESG) factors when investing has become even more critical. Institutional investors must employ ESG not just to mitigate risks and identify opportunities, but to engage with companies to bring about the positive change needed to drive a sustainable economic recovery in the post-Covid world.
In order to understand how ESG could be both a new performance marker and a growth driver in this environment, as well as how institutional investors are using ESG to make investment decisions and to assess their own performance, The Economist Intelligence Unit (EIU), sponsored by UBS, surveyed 450 institutional investors working in asset and wealth management firms, corporate pension funds, endowment funds, family offices, government agencies, hedge funds, insurance companies, pension funds, sovereign wealth funds and reinsurers in North America, Europe and Asia-Pacific.
Download the report and infographic to learn more.
Charting the course for ocean sustainability in the Indian Ocean Rim is an Economist Intelligence Unit report, sponsored by Environment Agency Abu Dhabi and the Department of Economic Development Abu Dhabi, which highlights key ocean challenges facing the Indian Ocean Rim countries and showcases initiatives undertaken by governments and the private sector in the region to address these challenges.
Click here to view the report.
The urgency for change in Asia's food system comes largely from the fact that Asian populations are growing, urbanising and changing food tastes too quickly for many of the regions’ food systems to cope with. Asian cities are dense and are expected to expand by 578m people by 2030. China, Indonesia and India will account for three quarters of these new urban dwellers.
To study what are the biggest challenges for change, The Economist Intelligence Unit (EIU) surveyed 400 business leaders in Asia’s food industry. According to the respondents, 90% are concerned about their local food system’s ability to meet food security needs, but only 32% feel their organisations have the ability to determine the success of their food systems. Within this gap is a shifting balance of responsibility between the public and private sectors, a tension that needs to and can be strategically addressed.
โควิด-19 ได้เปลี่ยนแปลงการท่องเที่ยวในหลายทิศทาง ตั้งแต่การแพร่ระบาดของโรคที่ส่งผลเสียหายอย่างมากต่อชีวิตมนุษย์และสังคมได้เริ่มต้น นักท่องเที่ยวได้คิดใคร่ครวญถึงผลกระทบต่อวันหยุด พักผ่อนในชุมชน เศรษฐกิจในท้องถิ่น และสิ่งแวดล้อมกันมากขึ้น แม้ว่าจะมีการหยิบยกประเด็นนี้ มาพูดถึงเมื่อสองสามปีที่ผ่านมา แต่การแพร่ระบาดนี้ก็ส่งผลให้เกิดการตื่นตัวด้านการเดินทางท่องเที่ยวที่หลากหลายและเร่งรัดการผลักดันไปสู่ การเดินทางท่องเที่ยวที่ใส่ใจและรับผิดชอบมากยิ่งขึ้นในเอเชียแปซิฟิก
จากการสำรวจโดย Economist Impact ที่สอบถามนักท่องเที่ยวมากกว่า 4,500 คนในภูมิภาค ทั้งในออสเตรเลีย ญี่ปุ่น อินเดีย มาเลเซีย ฟิลิปปินส์ สิงคโปร์ เกาหลีใต้ ไต้หวัน และไทย แสดงให้เห็นว่ามากกว่า 7 ใน 10 (71.8%) ของผู้ตอบแบบสำรวจเห็นด้วยว่าโควิด-19 ได้เปลี่ยนแนวความคิดของพวกเขาที่มีต่อการท่องเที่ยวแบบยั่งยืนโดย ทำให้การท่องเที่ยวดังกล่าวมีความสำคัญต่อพวกเขามากขึ้น
ตัวเลขนี้เพิ่มสูงยิ่งขึ้นไปอีกในบางประเทศ โดยที่ผู้ตอบแบบสำรวจ 98.5% ในฟิลิปปินส์ 96.5% ใน อินเดีย และ 93.5% ในมาเลเซียกล่าวว่าการแพร่ระบาดได้เปลี่ยนแนวความคิดของพวกเขาที่มีต่อการท่องเที่ยวแบบยั่งยืน อีกทั้งมากกว่าสี่ในห้ายังกล่าวถึงความจำเป็นที่จะต้องมีหลักปฏิบัติเกี่ยวกับการท่องเที่ยวแบบยั่งยืนอีกด้วย
เป็นไปได้หรือไม่ว่าเรากำลังอยู่ในรุ่งอรุณของยุคแห่งการเดินทางท่องเที่ยวที่ใส่ใจรับผิดชอบมากขึ้น ผลการสำรวจของเราชี้ให้เห็นเช่นนั้น ผู้ตอบแบบสำรวจมากกว่าครึ่ง (57.1%) กล่าวว่าพวกเขามีมุมมองต่อการท่องเที่ยวแตกต่างออกไป รวมถึงวิธีที่จะทำให้การท่องเที่ยวมีความยั่งยืนอีกด้วย โดยเฉพาะอย่างยิ่ง เนื่องจากการท่องเที่ยวนี้ เกี่ยวโยงกับเศรษฐกิจในท้องถิ่น ชุมชน วัฒนธรรม และสิ่งแวดล้อม
รายงานจาก Economist Impact ที่ได้รับการสนับสนุนโดย Airbnb ฉบับนี้ สำรวจการฟื้นตัวของการท่องเที่ยวในภูมิภาคเอเชียแปซิฟิก โดยมุ่งศึกษาว่าการเดินทางท่องเที่ยวจะสามารถเปลี่ยนแปลงไปในทิศทางใดได้บ้างจากการเพิ่มขึ้นของนักท่องเที่ยวที่มีความใส่ใจรับผิดชอบ รายงานนี้อิงตามการศึกษาค้นคว้าที่ครอบคลุมในวงกว้างและการสำรวจนักท่องเที่ยวมากกว่า 4,500 คนจากทั่วทั้งภูมิภาค รายงานฉบับนี้ เขียนโดย Siddharth Poddar และ เรียบเรียงโดย Pratima Singh
เราขอขอบคุณผู้มีส่วนสนับสนุนต่อไปนี้ที่ให้ข้อมูลเชิงลึกเพิ่มเติม
• Soity Banerjee นักเขียนอิสระเรื่องการท่องเที่ยวและบรรณาธิการโครงการจาก Outlook Responsible Tourism Initiative
• Gaurav Bhatnagar ผู้อำนวยการจาก The Folk Tales
• Rachel Dodds ผู้อำนวยการจาก Sustaining Tourism และศาสตราจารย์ที่มหาวิทยาลัย Ryerson University
• Randy Durband ประธานเจ้าหน้าที่บริหารจาก Global Sustainable Tourism Council
• Philip Goh รองประธานประจำภูมิภาคเอเชียแปซิฟิกจาก International Air Transport Association
• Freya Higgins-Desbiolles อาจารย์ภาควิชาการจัดการการท่องเที่ยวของมหาวิทยาลัย University of South Australia’s Business School
• Seul Ki Lee ผู้อำนวยการจาก LINC+ Project และรองศาสตราจารย์ของมหาวิทยาลัย Sejong University
• Liz Ortiguera ประธานเจ้าหน้าที่บริหารจาก Pacific Asia Travel Association
The scale of the obstacles facing companies is revealed in a major research programme conducted by The Economist Intelligence Unit and sponsored by HSBC. While costs, skills gaps and supply-chain complexity are among the pain points for companies, perhaps the biggest challenge for many will be making the business-model shifts needed to achieve net-zero.
The Covid-19 pandemic has exposed a wealth of interconnections – between ecological and human wellbeing, between economic and environmental fragility, between social inequality and health outcomes, and more. The consequences of these connections are now filtering through, reshaping our society and economy.
In this setting, the need to integrate environmental, social and governance (ESG) factors when investing has become even more critical. Institutional investors must employ ESG not just to mitigate risks and identify opportunities, but to engage with companies to bring about the positive change needed to drive a sustainable economic recovery in the post-Covid world.
In order to understand how ESG could be both a new performance marker and a growth driver in this environment, as well as how institutional investors are using ESG to make investment decisions and to assess their own performance, The Economist Intelligence Unit (EIU), sponsored by UBS, surveyed 450 institutional investors working in asset and wealth management firms, corporate pension funds, endowment funds, family offices, government agencies, hedge funds, insurance companies, pension funds, sovereign wealth funds and reinsurers in North America, Europe and Asia-Pacific.
Download the report and infographic to learn more.
Charting the course for ocean sustainability in the Indian Ocean Rim is an Economist Intelligence Unit report, sponsored by Environment Agency Abu Dhabi and the Department of Economic Development Abu Dhabi, which highlights key ocean challenges facing the Indian Ocean Rim countries and showcases initiatives undertaken by governments and the private sector in the region to address these challenges.
Click here to view the report.
The urgency for change in Asia's food system comes largely from the fact that Asian populations are growing, urbanising and changing food tastes too quickly for many of the regions’ food systems to cope with. Asian cities are dense and are expected to expand by 578m people by 2030. China, Indonesia and India will account for three quarters of these new urban dwellers.
To study what are the biggest challenges for change, The Economist Intelligence Unit (EIU) surveyed 400 business leaders in Asia’s food industry. According to the respondents, 90% are concerned about their local food system’s ability to meet food security needs, but only 32% feel their organisations have the ability to determine the success of their food systems. Within this gap is a shifting balance of responsibility between the public and private sectors, a tension that needs to and can be strategically addressed.
The need to get better value from healthcare investment has never been more important as ageing populations and increasing numbers of people with multiple chronic conditions force governments to make limited financial resources go further.
These pressures, along with a greater focus on patient-centred care, have raised the profile of VBHC, especially in European healthcare systems. Sweden, with its highly comprehensive and egalitarian healthcare system, has been a leader in implementing VBHC from the beginning, a fact that was underscored in a 2016 global assessment of VBHC published by The Economist Intelligence Unit.
This paper looks at the ways in which Sweden has implemented VBHC, the areas in which it has faced obstacles and the lessons that it can teach other countries and health systems looking to improve the value of their own healthcare investments.
With more older women also working, how will the rising trend of breast cancer survivorship manifest in workplace policies, practices and culture? What challenges do breast cancer survivors face when trying to reintegrate into the workforce, or to continue working during treatment? How can governments, companies and society at large play a constructive role?
This series of reports looks at the situation for breast cancer survivors in Australia, New Zealand and South Korea. It finds that while progress has been made, more needs to be done, particularly in South Korea, where public stigma around cancer remains high.
Cardiovascular diseases levy a substantial financial toll on individuals, their households and the public finances. These include the costs of hospital treatment, long-term disease management and recurring incidence of heart attacks and stroke. They also include the costs of functional impairment and knock-on costs as families may lose breadwinners or have to withdraw other family members from the workforce to care for a CVD patient. Governments also lose tax revenue due to early retirement and mortality, and can be forced to reallocate public finances from other budgets to maintain an accessible healthcare system in the face of rising costs.
As such, there is a need for more awareness of the ways in which people should actively work to reduce their CVD risk. There is also a need for more primary and secondary preventative support from health agencies, policymakers and nongovernmental groups.
To inform the decisions and strategies of these stakeholders, The Economist Intelligence Unit and EIU Healthcare, its healthcare subsidiary, have conducted a study of the prevalence and costs of the top four modifiable risk factors that contribute to CVDs across the Asian markets of China, Australia, Hong Kong, Japan, Singapore, South Korea, Taiwan and Thailand.
Download the report to learn more.
The Covid-19 pandemic has exposed a wealth of interconnections – between ecological and human wellbeing, between economic and environmental fragility, between social inequality and health outcomes, and more. The consequences of these connections are now filtering through, reshaping our society and economy.
In this setting, the need to integrate environmental, social and governance (ESG) factors when investing has become even more critical. Institutional investors must employ ESG not just to mitigate risks and identify opportunities, but to engage with companies to bring about the positive change needed to drive a sustainable economic recovery in the post-Covid world.
In order to understand how ESG could be both a new performance marker and a growth driver in this environment, as well as how institutional investors are using ESG to make investment decisions and to assess their own performance, The Economist Intelligence Unit (EIU), sponsored by UBS, surveyed 450 institutional investors working in asset and wealth management firms, corporate pension funds, endowment funds, family offices, government agencies, hedge funds, insurance companies, pension funds, sovereign wealth funds and reinsurers in North America, Europe and Asia-Pacific.
Download the report and infographic to learn more.
Charting the course for ocean sustainability in the Indian Ocean Rim is an Economist Intelligence Unit report, sponsored by Environment Agency Abu Dhabi and the Department of Economic Development Abu Dhabi, which highlights key ocean challenges facing the Indian Ocean Rim countries and showcases initiatives undertaken by governments and the private sector in the region to address these challenges.
Click here to view the report.
The urgency for change in Asia's food system comes largely from the fact that Asian populations are growing, urbanising and changing food tastes too quickly for many of the regions’ food systems to cope with. Asian cities are dense and are expected to expand by 578m people by 2030. China, Indonesia and India will account for three quarters of these new urban dwellers.
To study what are the biggest challenges for change, The Economist Intelligence Unit (EIU) surveyed 400 business leaders in Asia’s food industry. According to the respondents, 90% are concerned about their local food system’s ability to meet food security needs, but only 32% feel their organisations have the ability to determine the success of their food systems. Within this gap is a shifting balance of responsibility between the public and private sectors, a tension that needs to and can be strategically addressed.
What constitutes material climate risks remains under debate within the financial industry, with clarity and consensus on the topic elusive. It is clear, however, that unless parties agree on what needs to be measured, the consequence could be an irreversible breach of climate limits—such as those set out in the Paris Agreement.
In some instances the impact of this shift will be shaped by local factors, such as demographic changes. In other instances this shift will reflect shared characteristics, as demonstrated by the greater popularity of overseas investing among younger high-net-worth individuals (HNWIs) brought up in an era of globalisation. Whatever the drivers, the landscape of wealth is changing—from local to global, and from one focused on returns to one founded on personal values.
Despite rising economic concerns and a tradition of investor home bias in large parts of the world, the new landscape of wealth appears less interested in borders. According to a survey commissioned by RBC Wealth Management and conducted by The Economist Intelligence Unit (EIU), younger HNWIs are substantially more enthusiastic about foreign investing. The U.S. is a particularly high-profile example of a country where a long-standing preference for investments in local markets appears set to be transformed.
Click the thumbnail below to download the global executive summary.
Read additional articles from The EIU with detail on the shifting landscape of global wealth in Asia, Canada, the U.S. and UK on RBC's website.
To better understand the opportunities and challenges in developing a fintech business in seven ASEAN markets, The Economist Intelligence Unit conducted wide-ranging desk research supplemented by seven in-depth interviews with executives in Australia and ASEAN.
Download report and watch video interview to learn more.
Read our Taxing digital services, U.S. tax reform: The global dimension, & Planning for life after NAFTA articles by clicking the thumbnails below.
In this episode, senior editor Jason Wincuinas speaks to Hal Hodson, The Economist’s Asia technology correspondent, about established and emerging technologies that have potential to reduce carbon footprints and make headway against climate change.
To learn more about investing in climate change mitigation, read Tech imperative: Looking beyond ESG investing to reinvent the future, a report by The Economist Intelligence Unit.
The Economist's recent coverage on technology: The roaring 20s? Towards a new era of innovation
Listen to the previous episodes and subscribe for upcoming episodes.
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Financing sustainability: Asia Pacific embraces the ESG challenge is an Economist Intelligence Unit report, sponsored by Westpac. It explores the drivers of sustainable finance growth in Asia Pacific as well as the factors constraining it. The analysis is based on two parallel surveys—one of investors and one of issuers—conducted in September and October 2019.
If the countries of Asia Pacific are to limit the negative environmental effects of continued economic growth, and companies in the region are to mitigate their potential climate risks and make a positive business contribution through improving the environment and meeting the UN's Sustainable Development Goals (SDGs), large volumes of investment in sustainable projects and businesses need to be mobilised. A viable sustainable finance market is taking shape in the region to channel commercial investor funds, and both investors and issuers say they are achieving a financial benefit from their investment and financing activities. The market is still in the early stages of development, however, and must expand and mature to meet investor needs.
The chief constraint on sustainable finance growth in the region has been the limited supply of bankable sustainable projects. Our research suggests supply is increasing, but with investor demand continuing to grow apace, the gap will remain an obstacle in the short- to medium-term. Among the organisations in our issuer survey, only 7% have used sustainable finance instruments to fund projects. However, nearly nine in ten (87%) said they intend to do so in the next year, which should begin to bridge the gap between supply and demand.
Based on issuers’ stated intentions, investors will have a range of instruments to choose from, including green loans and bonds and sustainability loans and bonds. Large numbers of investors indicate that they intend to deploy a greater proportion of capital to these over the next three years.
Along with its wealth, Asia’s climate risks have been rising. Low-lying coastal cities are particularly vulnerable to climate change and regional population and economic centres—such as Bangkok, Ho Chi Minh City, Manila and Shanghai—sit upon that precipice. Yet in terms of green fixed income, Asia faces another risk: lack of issuance and uptake.
Fixed-income plays a significant role in climate mitigation because its market is about 60% larger than its equity cousin which still attracts more media and investor attention. Global issuance of green fixed income has increased markedly since its inception, reaching US$350bn in 2019. Still, the amount is only about 5% of the global fixed income market and represents just over a tenth of what needs to be raised to meet Sustainable Development Goals (SDGs) in emerging markets alone.
Efforts to make Asia’s finance greener have marked a transformative effect on the relationship between companies and investors. Conversations about sustainability that were absent a decade ago are now happening and have been central to helping the region come so far in such a short time: Asia’s banks and corporates have gone from 1% of green issuance in 2013 to 45% in 2019.
Still, not all is rosy (or green) as many obstacles remain. Asia’s green fixed income originates from a narrow base. China is the dominant market regionally and credit quality is largely confined to supranational institutions and investment-grade issuers. That is not enough. Other markets, such as high-yield, assetbacked securities (ABS) and private debt are, at best, in infancy. Furthermore, developedmarket investors tend to underweight Asia.
Green fixed income data is also a persistent challenge. A profusion of providers use a wide range of methodologies, many of which can be opaque and defy comparison. Investors face difficulties in determining those which best suit their needs. The vast amount of data that issuers are required to provide can also be a deterrent to going green; or worse, it leads to “greenwashing”, a vexing problem of questionable categorisation globally. The emergence of more consistent taxonomies is helping, but the patchwork of approaches still forms a barrier. Market practitioners interviewed for this paper did find agreement on green fixed income limitations, but they also showed optimism that recent developments in debt-products indicate a positive direction, even if the needle measuring progress has yet to move as far as it should.
From consensus, the region’s green fixed income progress depends on the development of a consistent taxonomy—not just in Asia, but globally—as well as better linkage of Paris Agreement goals to quantifiable key performance indicators (KPIs). The result could create better incentives for issuers and asset owners alike.
Have green bonds—as the largest green fixed income competent—been enough? Despite the interviewees’ breadth of experience and varied professional functions, they are almost entirely synchronised in their response to this question: “no”.
So what’s next?
Tech imperative: Looking beyond ESG to reinvent the future is a report from The Economist Intelligence Unit, commissioned by E Fund.
In the world of finance, green bonds were introduced to encourage sustainable projects. Environmental, social and governance (ESG) factors have spurred investors to review where their dollars go to ensure they do more good than harm. And impact investing has ratcheted that objective up to fund projects, programmes and organisations that have missions tightly aligned with the Sustainable Development Goals. But what about a more old-fashioned approach of favouring the better mouse trap? Not necessarily the box-ticking exercise of ESG or the policy acrobatics of green bonds, but simply investing in technologies that show promise to decarbonise the environment.
This report, surveying more than 300 large investment funds—including asset managers and asset owners—investigates how these organisations view investment into technologies that mitigate and adapt to climate change, as well as areas they are investing in, and whether the return objectives are framed differently to other investments.
In addition, this study takes wide-ranging desk research and indepth interviews with experts in the fields of investing, climate and technology into account. Dewi John is the report author and Jason Wincuinas is the editor. Our thanks are due to the following interviewees for their time and insights:
Mark Campanale, founder and executive chairman, Carbon Tracker Initiative Stephen Freedman, head of research and sustainability, thematic equities, Pictet Asset Management Andrew Gray, director of ESG and stewardship, AustralianSuper Pedro Antonio Guazo Alonso, representative of the secretary-general for investments, UN Joint Staff Pension Fund (UNJSPF) Carine Smith Ihenacho, chief corporate governance officer, Norges Bank Investment Management (NBIM) Adrian Locher, founder and CEO, Merantix Julian Poulter, partner, Energy Transition Advisors Anne Simpson, director, board governance and strategy, CalPERS
In the final episode of 2020, host Jason Wincuinas speaks to Tom Standage, deputy editor at The Economist, and editor of The World In 2021, a collection of forward-gazing coverage from The Economist, to find out what the world in 2021 will look like in Asia.
Relevant content from The Economist:
The World In 2021 Ten trends to watch in the coming year by Tom Standage The World Ahead The World Ahead from The Economist RadioTopics covered:
Will 2021 be the year of the vaccine? What will recovery look like? The "new world disorder" - will it get better? Revival of the WTO Will China pick up the global baton after the US? Will companies step up on social issues? The rise of tech companies in Asia Where will the first flying car be?Listen to the previous episodes and subscribe for upcoming episodes.
Subscribe on iTunes | Spotify | Google podcasts | Your preferred podcasting platforms
Relevant content from The Economist Intelligence Unit:
China icebergs (case study on autonomous vehicles in China) Intertwined relations: China, the US, and the global trade of AI
In this episode, senior editor Jason Wincuinas speaks to Jeffrey Ding, a Rhodes Scholar at the University of Oxford and the China lead at “The Centre for the Governance of AI”, which is part of the Future of Humanity Institute, and founder of "ChinAI" (chinai.substack.com), a newsletter that shares translations of Chinese AI research papers.
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Tech imperative: Looking beyond ESG to reinvent the future is a report from The Economist Intelligence Unit, commissioned by E Fund.
Environmental, social and governance (ESG) investing has evolved from the rather straightforward approach of stock exclusion to more sophisticated and data-heavy frameworks. How investment firms are tackling this ESG data load is a key question. This research analyses the degree to which artificial intelligence (AI) is being deployed, how it is being used and what more it might do in the future for ESG investment decisions. Integral to that question is an investigation into the state, availability and integrity of ESG data in Asia. Big data has offered insight in many other business sectors and industries, but is Asia’s ESG data big enough yet to be meaningful?
The Economist Intelligence Unit surveyed decision-makers at a spectrum of large asset owners and institutional investors about their observations related to “impact” versus “income” goals and about sentiment on data quality. We also spoke to a range of experts on the same topics to study how AI technology may be changing the investment world, specifically with regard to improving ESG returns or impact.
The key findings are as follow:
The rise of ESG in Asia: some 95% of respondents believe that ESG investing is important to their firm, with the overwhelming majority saying it will be more so in three years. More than 80% believe ESG has a positive impact on returns.ESG factor weighting: almost half of respondents said they weighted environmental, social and governance factors equally. For the remainder that didn’t, the individual most important factor was environmental, with mainland China’s increasing focus on such issues a major driver. About 90% of respondents feel that environmental and social issues will gain the same importance as governance within a decade.
Investors’ AI uptake: pension funds have the highest uptake of AI for ESG screening. There is, however, broad usage across all investor types and regions. A rapidly expanding range of AI techniques, drawing information from diverse sources, is being used to fill gaps in standard corporate disclosures.
Data quality and suitability: while there is broad satisfaction with available data, this is combined with recognition that gaps exist. Most investors are responding to such limitations by conducting their own research on the information available.
Looking forward: much ESG-related data are backwards-facing and cannot, therefore, identify ongoing change in corporate behaviour. The promise of adding AI to the equation is to get a more forward view. Analytics companies are developing models to flag behavioural shifts and experts stress that focusing on data only misses the importance of how it is framed—something that remains a very human decision.
Along with its wealth, Asia’s climate risks have been rising. Low-lying coastal cities are particularly vulnerable to climate change and regional population and economic centres—such as Bangkok, Ho Chi Minh City, Manila and Shanghai—sit upon that precipice. Yet in terms of green fixed income, Asia faces another risk: lack of issuance and uptake.
Fixed-income plays a significant role in climate mitigation because its market is about 60% larger than its equity cousin which still attracts more media and investor attention. Global issuance of green fixed income has increased markedly since its inception, reaching US$350bn in 2019. Still, the amount is only about 5% of the global fixed income market and represents just over a tenth of what needs to be raised to meet Sustainable Development Goals (SDGs) in emerging markets alone.
Efforts to make Asia’s finance greener have marked a transformative effect on the relationship between companies and investors. Conversations about sustainability that were absent a decade ago are now happening and have been central to helping the region come so far in such a short time: Asia’s banks and corporates have gone from 1% of green issuance in 2013 to 45% in 2019.
Still, not all is rosy (or green) as many obstacles remain. Asia’s green fixed income originates from a narrow base. China is the dominant market regionally and credit quality is largely confined to supranational institutions and investment-grade issuers. That is not enough. Other markets, such as high-yield, assetbacked securities (ABS) and private debt are, at best, in infancy. Furthermore, developedmarket investors tend to underweight Asia.
Green fixed income data is also a persistent challenge. A profusion of providers use a wide range of methodologies, many of which can be opaque and defy comparison. Investors face difficulties in determining those which best suit their needs. The vast amount of data that issuers are required to provide can also be a deterrent to going green; or worse, it leads to “greenwashing”, a vexing problem of questionable categorisation globally. The emergence of more consistent taxonomies is helping, but the patchwork of approaches still forms a barrier. Market practitioners interviewed for this paper did find agreement on green fixed income limitations, but they also showed optimism that recent developments in debt-products indicate a positive direction, even if the needle measuring progress has yet to move as far as it should.
From consensus, the region’s green fixed income progress depends on the development of a consistent taxonomy—not just in Asia, but globally—as well as better linkage of Paris Agreement goals to quantifiable key performance indicators (KPIs). The result could create better incentives for issuers and asset owners alike.
Have green bonds—as the largest green fixed income competent—been enough? Despite the interviewees’ breadth of experience and varied professional functions, they are almost entirely synchronised in their response to this question: “no”.
So what’s next?
Financing sustainability: Asia Pacific embraces the ESG challenge is an Economist Intelligence Unit report, sponsored by Westpac. It explores the drivers of sustainable finance growth in Asia Pacific as well as the factors constraining it. The analysis is based on two parallel surveys—one of investors and one of issuers—conducted in September and October 2019.
If the countries of Asia Pacific are to limit the negative environmental effects of continued economic growth, and companies in the region are to mitigate their potential climate risks and make a positive business contribution through improving the environment and meeting the UN's Sustainable Development Goals (SDGs), large volumes of investment in sustainable projects and businesses need to be mobilised. A viable sustainable finance market is taking shape in the region to channel commercial investor funds, and both investors and issuers say they are achieving a financial benefit from their investment and financing activities. The market is still in the early stages of development, however, and must expand and mature to meet investor needs.
The chief constraint on sustainable finance growth in the region has been the limited supply of bankable sustainable projects. Our research suggests supply is increasing, but with investor demand continuing to grow apace, the gap will remain an obstacle in the short- to medium-term. Among the organisations in our issuer survey, only 7% have used sustainable finance instruments to fund projects. However, nearly nine in ten (87%) said they intend to do so in the next year, which should begin to bridge the gap between supply and demand.
Based on issuers’ stated intentions, investors will have a range of instruments to choose from, including green loans and bonds and sustainability loans and bonds. Large numbers of investors indicate that they intend to deploy a greater proportion of capital to these over the next three years.
International trade has helped to lift hundreds of millions of people around the world out of poverty, but the benefits do not come without risk. Right or wrong, labour disruption, environmental degradation, and worsening inequality are frequently associated with trade. However, proactive and responsible policy can harness the good elements of trade while mitigating the bad, making for a more robust global trading community.
Yet the enthusiasm in Asia for trade does not appear to have waned. This broad societal consensus behind international trade has enabled Asian countries to continue broadening and deepening existing trading relationships, for example, by quickly hammering out a deal for the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP) in early 2018 following the US’s withdrawal from its predecessor in 2017.
Asia, then, finds itself in the unique position of helping lead and sustain the global economy’s commitment to free and fair trade. It is in this context that the need for sustainability in trade is ever more crucial.
The Hinrich Foundation Sustainable Trade Index was created for the purpose of stimulating meaningful discussion of the full range of considerations that policymakers, business executives, and civil society leaders must take into account when managing and advancing international trade.
The index was commissioned by the Hinrich Foundation, a non-profit organisation focused on promoting sustainable trade. This, the second edition of the study, seeks to measure the capacity of 20 economies—19 in Asia along with the US—to participate in the international trading system in a manner that supports the long-term domestic and global goals of economic growth, environmental protection, and strengthened social capital. The index’s key findings include:
Countries in Asia, especially the richer ones, have broadly regressed in terms of trade sustainability. Hong Kong is developed Asia’s bright spot, recording a slight increase in its score and topping the 2018 index. Several middle-income countries perform admirably, led by Sri Lanka. For the economic pillar, countries generally performed well in terms of growing their labour forces as well as their per-head GDPs. For the social pillar, sharp drops for some countries in certain social pillar indicators contribute to an overall decline. For the environmental pillar, with deteriorating environmental sustainability in many rich countries, China, Laos and Pakistan are the only countries to record increases in scores. Sustainability is an ever more important determinant of FDI and vendor selection in choosing supply-chain partners. Companies are improving the sustainability of their supply chains by restructuring and broadening relationships with competitors and vendors.
