Asset Management Awards 2022 for ESG Excellence, explained
Since its launch a decade ago, the AsianInvestor Asset Management Awards have become an industry leader, sought after by the largest asset managers with a presence in Asia Pacific.
The awards have evolved through the years. While they used to be selected solely by the editorial team, we now tap the knowledge and expertise of a judging panel comprising independent industry veterans and top executives from asset owners across the region to bring greater weight to our awards procedure.
We have also developed more specific criteria with a points system to guide entries and allow for a more structured and transparent process.
Today we reveal the rationale behind the judges' selection of winners for our inaugural ESG Excellence Awards, which we had announced in April.
The criteria for this category included how entrants created value for clients and their competitive advantages, the use of data and established frameworks to measure success, and their strategy and impementation. As with all our awards, client testimonials and case studies were given some weight in the decision process as well.
Tomorrow, we reveal the rationale for the first part of our marquee awards. Congratulations again to all winners.
Best Environmental Investment Strategy Adviser
BNP Paribas Asset Management, Hong Kong
The only sizeable “dark green” listed equity fund, BNP Paribas Energy Transition offers a unique product within the market with the dual objective of returns and environmental impact.
Returns were impressive, making it an obvious choice for judges.
Thanks to a tilt towards value and good stock selection, a strong showing in the second half of 2020 carried through into 2021. Returns were 85.09% returns over the past two years, ranking it second across all long-only equity funds globally in 2020 with 167% returns.
The fund showed that ESG investment returns can be as strong, if not stronger, than any other sector. According to the Bloomberg sub-industry breakdown, BNPP Energy Transition has the highest exposure to green sub-industries; almost double the peer average.
Using big data and quantitative techniques to track its progress, manage risk, portfolio construction and for reporting to guide clients, BNPP Energy Transition has a full-time dedicated quantitative analyst to undertake the building and modelling of data.
This data analysis helps position the fund so that client teams can suggest a strategy appropriate to an investor's individual investment goals.
The emphasis on constructing a diverse team also caught the attention of judges.
BNPP Energy Transition said in its submission that this diversity – comprising 29% representation of ethnic minorities, 29% female representation, and high age diversity as well as 8 different language groups – aided in broader idea generation, reduced confirmation bias and group think and led to “holistically considered and rounded decisions”.
Best ESG Investment Strategy Advised for Private Markets
Amundi Hong Kong
With a name like Amundi there are plenty sitting up and paying attention, including AI’s judges. There were big numbers in this submission.
Responsible investments in passive management, currently sit at around €895 billion. In terms of its actively managed open-ended funds, 100% incorporated ESG criteria and were underweighted or overweighted according to their contribution to environmental and societal issues.
Developing its own in-house ESG rating process based on a “best in class”, it currently rates some 13,500 corporates and sovereigns, giving them ESG ratings on a seven-notch scale from A to G.
Assets dedicated to specific initiatives promoting the energy transition or social cohesion amounted to €35 billion.
In terms of voting and engagement with companies, Amundi exercises its voting rights with a focus on two major themes: climate issues and social cohesion.
In 2021, Amundi voted at over 7,200 annual general meetings and initiated dialogue on the environmental transition and climate change with 547 companies.
In November 2021, IFC and Amundi launched a new $2 billion strategy to establish a fund to mobilise private investment into emerging market sustainable and green bonds.
The Build-Back-Better Emerging Markets Sustainable Transaction (“BEST”) strategy, managed by Amundi, will channel capital from institutional investors into anchor investments involving sustainable bond issuances from developing countries.
The aim is to enable even more funding for such transactions, further strengthening the asset class and deploying greater resources in priority sectors, such as climate and gender.
Best Impact Investment Adviser
Stewart Investors, Singapore
Stewart Investors made a strong and impactful submission that stressed the value of taking a long-term view of the market as well as using a bottom-up approach.
Invested in some companies for more than 20 years, Stewart Investors says it only makes an initial investment if the company contributes to, and benefits from, sustainable development.
The criteria for this, too, go beyond merely checklist ESG criteria.
“Our consideration of sustainability is holistic; it includes ESG as a very important quality marker but is more than ESG,” the company said in its submission.
“For example, many companies which perform very well on ESG data metrics would not fall within our universe because the products and services they sell do not provide solutions to sustainable development challenges.”
By analysing this broad range of quantitative and qualitative factors, it avoids focus on a “handful of standardised indicators”, which it says are more often about operational efficiency than company impact.
“Instead, we focus on the diverse contributions each company is making.”
Ultimately, the company makes its decisions based on merit and does not rely on third-party researchers to tell it what is sustainable. Judges were impressed by this entry which showed that making sustainable choices requires critical thinking.
“The team’s starting point is a blank sheet of paper, not the index or entire investment universe,” Stewart Investors says. “We do not screen from the top-down. We don’t go about it by ticking boxes on a sheet, drawing up sets of screening criteria or plugging numbers into computer programmes. We believe these things can hide as much as they reveal.”
Best Net-Zero Solutions Adviser
Robeco took out this award due to a real economy approach and its understanding that engagement – including with high-emitters – is critical if we are to make any progress towards net zero.
Having been in the game since 2008 has meant that it has plenty of runs on the board too.
Simply divesting from high carbon assets, Robeco argues, means that these funds will simply appear in another portfolio without any lasting impact in the real world.
It is exactly these high-emitting sectors that require the most capital to transform.
“Our role as investors is not only to invest in that transition, but also to accelerate it. Decarbonisation of our portfolios should be based on decarbonisation of the assets that we own,” Robeco said in its submission.
“For this to happen, we need to work together alongside governments, industry and consumers. Governments need to price in the cost of carbon emissions, companies need to increase green capex, and consumers need to shift to sustainable consumption patterns.”
By investing in companies it believes will thrive in the transition and by engaging with those that do not move fast enough, Robeco hopes to accelerate the transition.
This involves stepping up its active ownership activities through voting and engagement with the top 200 emitters in its investment universe and focusing on engaging on climate change with 55 companies that are responsible for 20% of portfolio emissions.
Additionally, Robeco says it aims to intensify its dialogues with sovereign bond issuers and together with other investors, call for climate action by countries as governments play a vital role in the transition towards net zero.
Best Social Investment Strategy Adviser
Stewart Investors, Singapore
Judges described this as a ‘strong entry’ that emphasised engagement at every level.
With a need to understand the commitment and approach of key decision-makers in any business, “including their attitudes towards the sustainability headwinds and tailwinds their company faces”, Stewart Investors integrates engagement into the responsibilities of its investment team.
The way each company responds to engagement is then integrated into the analysts’ conviction level in the company.
Engagement centres on issues such as pollution, natural resource degradation, biodiversity and climate change. This includes business attitudes towards packaging, plastic pellets, deforestation, sustainability of supply chains (soy, palm oil and coffee), fossil fuel versus renewables, water, waste and energy efficiency.
In terms of social investment strategies, Steward Investors also engages in minute detail on issues such as aligned remuneration and incentives, including living wage issues, the gender pay gap and complexity of incentives.
As far as diversity, equity and inclusion is concerned, the concentration is on diversity, particularly gender, in senior management and on boards.
Addictive products – such as indirect exposure to tobacco and sugar content in food – are also high on the list of engagement issues. In terms of governance, corporate strategy and legal structure are also a focus.
It’s also no stranger to wearing out shoe leather when it comes to the long-term relationships it builds with the companies it invests in. It conducted no fewer than 438 company meetings in 2021.
“We believe that no company is perfect and engagement and voting are key responsibilities for us as long-term shareholders,” the company said in its submission. “Engagement is a means to mitigate business risks, protect against potential headwinds and improve sustainability outcomes.”