Asia-Pacific Investors Raised Allocations Toward ESG Investments in 2020

Sustainable investments are not just picking up momentum in the United States. In the Asia-Pacific region, institutional investors raised allocations toward environmental, social, and governance investments during the pandemic last year as well.

The global pandemic has helped raise ESG awareness, highlighting how catastrophic events like climate change can impact investment returns, CNBC reports.

According to a recent MSCI 2021 Global Institutional Investor survey, in the Asia-Pacific region, around 79% of investors increased ESG exposure ‘significantly’ or ‘moderately’ in response to Covid-19.

In comparison, 77% of investors globally raised exposure to sustainable investments last year. Overall, the figure jumped to 90% among the largest institutions, or those with more than $200 billion of assets.

“Once an issue for ‘green funds’ and side-pockets, ESG and climate are now firmly established as high priority issues,” Baer Pettit, MSCI president and chief operating officer, said in their latest report. “2020 marked a profound shift in the way institutions invest as many investors have recognized that many companies with strong environmental, social and governance practices outperformed during the pandemic.”

Looking ahead, 57% of Asia-Pacific investors indicated that they will have ‘completely’ or ‘to a large extent’ incorporated ESG issues into their investment analysis and decision-making processes by the end of 2021.

“ESG analysis and integration is increasingly becoming mainstream in APAC, and the rate of adoption has increased during the pandemic,” Gabriel Wilson-Otto, global head of sustainability research at French bank BNP Paribas asset management, told CNBC, pointing out that Covid-19 has put “a spotlight on corporate behaviour, business resilience and broader sustainability issues.”

“The human cost of the pandemic highlighted the importance of robust health care systems, treatment of employees and contributed to record issuance of social bonds in 2020 as investors sought to direct capital towards solutions,” Wilson-Otto said.

Wilson-Otto also believes that a generational shift has also contributed to the ‘values-based’ investing demand, along with the increasingly favorable economics of investing in energy transition and other sustainability solutions.

“As a result, there has been a shift in focus from ‘ESG integration may hurt returns’, towards a growing recognition that sustainable business practices can be aligned with business resilience,” Wilson-Otto added.

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