Asset managers that excelled in ESG in Asia, explained
AsianInvestor’s industry-leading Asset Management Awards are widely tracked by asset managers and asset service providers with a presence in Asia Pacific.
While the awards process has evolved through the years, the awards remain laser-focused on picking the brightest and best stars in the region's asset management industry.
Our judging panel, comprising independent industry veterans and top executives from asset owners across the region, assessed all qualified entries and took the lead in providing valuable insights and guidance on shortlisting the best candidates.
The final entries were also assessed by the editorial team to eventually decide on the ultimate winners.
In this instalment, we explain the rationale behind the judges’ selection of the winners for the ESG Excellence categories.
Best Fund House – Environmental & Best Fund House – Governance: BNP Paribas Asset Management
In sustainable finance, BNP Paribas Asset Management in the Asia Pacific is almost without peer and has been at the forefront of projects aimed at helping the region’s giants hit their net zero targets.
“This was an impressive portfolio and an outstanding submission on environmental projects,” judges said.
The efforts related to ESG includes working partnerships between local teams and clients to develop regionally relevant ESG research and engage with local companies and regulators.
BNPP AM’s deep expertise in ESG is widely recognised by the industry.
The French asset manager has been rated highly by non-government organisations that assess fund houses for their voting track record and actions related to corporate governance and long-term value creation.
Its commitment to Asia is evidenced by the fact that it has four team members for ESG in the region, with the research lead based in Hong Kong and another three members in Singapore.
All of them are pivotal to promoting ESG integration and capacity building within the Asian sales and investments team.
The French asset manager is firmly of the view that the region’s long-term economic growth prospects are likely to result in a corresponding increase in power consumption. This means that institutional investors will increasingly look to APAC for large-scale transactions that fund landmark renewable projects.
In terms of governance, judges were equally impressed by the BNP Paribas Asset Management's submission.
“The bank has a clear stewardship framework and was clearly superior to other candidates,” judges said, adding that BNP Paribas’ governance strategy displayed balance, stability and consistency.
“There’s clearly a reputation based on rigorous rules of ethics, compliance and transparency with a strong correlation in terms of values, compliance, and behaviours.”
Best Fund House – Social: Robeco
Global asset management company Robeco has placed the "Just Transition" front and centre of its engagement themes in 2023 and was a strong winner in this category.
Emphasising the need for a fair and inclusive approach in the transition towards a sustainable economy - ensuring that the social, economic, and environmental consequences are considered and minimised – Robeco’s engagement specialists aim to work closely with investment teams to assess performance.
“A company’s failure to implement appropriate Just Transition measures may result in, among other things, workers strikes and community backlash that disrupts business operations,” Robeco says.
“(These may include) difficulties penetrating markets with stringent ESG requirements, reputational damage, regulatory compliance issues, and a restricted access to capital.”
As of December 2023, Robeco has been engaging with more than 50 different companies on seven different social themes globally: these range across diversity and inclusion; human rights due diligence; just transition in emerging markets; labour practices; modern slavery; the social impact of gaming and sound social management.
“The importance of a Just Transition in emerging markets is beyond doubt,” according to the asset manager.
“However, transitions in emerging markets are a complex process that involves overcoming numerous challenges. A just transition needs a tailor-made approach and there is no ‘one size fits all’.”
Without a formal set of measurements for assessing a Just Transition, Robeco has developed a methodology to engage on this theme.
The engagement programme will initially focus on the energy (oil & gas and utilities) and mining sectors due to their urgent need to decarbonise.
The judges said these efforts, while still in their infancy, were highly commendable in promoting the often-ignored 'S' in ESG.
The programme is due to run from Q3 2023 to Q3 2026, and will no doubt be keenly watched by many.
Best Fund House – Impact: Milltrust International
Milltrust International Group, the UK- and Singapore-based wealth manager and investment solutions provider, has made solid ground in the world of impact investing since its launch in 2010.
With a key focus on the UN Sustainable Development Goals (SDGs), Milltrust has continued its work as an early pioneer in impact and sustainable investing.
“It has a clear methodology with a strong impact framework,” judges said of this entry. “They were very focused with a lot of achievements.”
Milltrust currently collaborates with the World Wildlife Fund through the Climate Impact Asia Fund which supports transition to a low-carbon economy at the same time as supporting conservation in places where it is most under threat.
“We achieve this by donating a significant portion of the fund’s fees (up to 40%) to WWF’s nature conservation programmes in Asia,” Milltrust says.
Milltrust and WWF, meanwhile, have co-developed a proprietary screening tool called Dark-Green-Filter which permits investment exclusively in those companies with greater than 50% of its revenues from decarbonisation businesses.
These include EVs, batteries, electric public transport, waste recycling, water treatment, solar and wind energy, and energy management services.
The investment solutions specialist has also been making progress in aligning Shariah investment with sustainable investment.
“We have started a partnership with a local Malaysian-based asset manager to run the Shariah-compliant version of the Climate Impact Asia Fund that will be launched in Q1 this year and the fund is also in the final stage of onboarding by a couple of private banks,” Milltrust says.
Best ESG Index Provider: FTSE Russell
FTSE indices well-deserved reputation for transparency and reliability is based on the construction of its scoring and indexing – if the data is not publicly available then it is not rated.
Non-disclosure of a required indicator is penalised with a zero score. In this way FTSE indices capture the degree of corporate disclosure.
When it comes to difficult assessments around ESG, increasingly clients are turning to FTSE Russell to better shape issues around alignment, methodology and risk. Judges concurred that there was little to touch this submission in this category.
Even the world’s largest pension fund, Japan’s Government Pension Investment Fund, uses a FTSE index to help it with its sustainable investment goals.
GPIF in 2017 commenced passive investment tracking the FTSE Blossom Japan Index. The fund’s AUM tracking the FTSE Blossom Japan Index continues to grow, with 2023 bringing a 14% year-on-year increase in AUM tracking the index.
As of December 2022, FTSE Russell had launched more than 180 sustainable investing indices with more than 160 funds totalling more than $280 billion in assets under management (AUM).
Throughout the year it has worked to enhance its methodology for better ESG and risk assessment.
An example of this is the evolution of the Sovereign Risk Monitor ESG Data used in its FTSE ESG Government Bond Index Series.
Following a market consultation in April, FTSE Russell started using the enhanced FTSE Sustainable Sovereign Risk Assessment Methodology (2SRM) ESG data instead of the Sovereign Risk Monitor (SRM) in its FTSE ESG Government Bond Index Series.
The FTSE Sovereign Risk Monitor (SRM) methodology is designed to measure the material financial risk from ESG factors for sovereign issuers, with data available for 151 countries from 1999 onwards.
However, The 2SRM responds to increasing market maturity and customer needs as well as the World Bank’s recommendations, delivering a strengthened methodology.
The improvements allow for better integration of forward-looking climate risks, including temperature alignment and physical risk, enhanced data coverage and a wider distribution of scores to better differentiate between high performers and laggards.