Five Apac instos named among top global ESG investors
Five Asian investing institutions made the list of the 25 most responsible investors globally, compiled by an advocacy group set up by a former chief investment officer at the Korea Investment Corporation (KIC).
Scott Kalb, a former CIO and deputy chief executive of KIC is the founder of the Responsible Asset Allocator Initiative at New America, an organisation dedicated to mobilising capital toward responsible investing and supporting the United Nations Sustainable Development Goals (SDGs).
His study, carried out in association with Tufts University in Boston, scored the performance of institutional asset allocators against these principles, highlighting the performance of the 25 best scoring sovereign wealth funds and government and industry-based pension funds.
The Asian region stacked up well in terms of total assets being managed responsibly – in fact it exceeded the US. However, the number of Asian funds ranked represented just a fifth of the 197 funds in the survey, although they represented nearly 30% of total AUM, courtesy of Japan's huge Government Pension Investment Fund.
|Asian Responsible Investing Leaders||Country||AUM ($ billion)|
|Government Pension Investment Fund||Japan||1,492|
|New Zealand Superannuation Fund||New Zealand||30|
|Victoria Funds Management Corp.||Australia||44|
Source: New America
The survey's criteria centred on responsible investment (RI) activities, and used 10 core principles and 20 criteria when analysing the investors' investing practices.
These included: public disclosures on RI policy and performance; statements of RI intent and explanations of strategies employed; details on how institutions measure and monitor RI in their portfolios; the adoption of recognised RI standards including the PRI and SDGs; and involvement with recognised organisations on RI.
The core principles and criteria were selected based on discussions with asset allocators and from global guidelines including the Principles for Responsible Investing (PRI), the United Nations Global Compact (UNGC) and the OECD Principles of Corporate Governance.
Kalb noted that the top 25 survey leaders stood out for their commitment to RI, integrating ESG risks into portfolio decision-making, and leading on issues such as climate change, gender equality, sustainable infrastructure, education and healthcare.
He added that there was a stark difference in key criteria rankings of the top 25 funds and the remaining 197 organisations. The top 25 scored an average of 96 points (out of 100), funds from 26 to 50 scored an average 89 points, but the remaining 147 funds only scored 33 points on average.
“These are relatively straightforward criteria, and it is surprising that so many funds rate poorly on them,” said Kalb.
For example, all the top 50 funds had offered statements on responsible investment policy in their annual reports or websites, joined partner organisations to learn about best practice and share knowledge on RI, and had integrated ESG risks into their investment decision-making.
In contrast, just 42% of the other 147 funds offered RI statements, 43% had joined partner organisations, and only 24% had integrated ESG risks into investment plans.
“Regretfully, many regulators, legal advisors, and consultants who work with large asset allocators like sovereign wealth funds and government pension funds continue to recommend a false choice: either optimising returns or considering ESG issues,” said Kalb in the report.
He added that this conflicts with academic studies, which reveal that companies with higher scores on material ESG metrics to generate higher financial and economic returns over time.
Kalb’s former organisation, KIC, fell short of the top ranked organisations, as did Thailand’s GPF and Malaysia’s EPF, both of which recently signed up to PRI. AsianInvestor asked these organisations for comment on the research findings but received no response.
The report can be viewed here.
|Asian funds that didn’t make the RI leaders list||Country||AUM ($ billion)|
|Bureau of Labor Funds||Taiwan||$132|
|Central Provident Fund Board||Singapore||$282|
|China Investment Corporation||China||$941|
|Employees Provident Fund||Malaysia||$199|
|Employees Provident Fund||Nepal||$3|
|First State Super||Australia||$64|
|Government Employees Pension||South Korea||$10|
|Government Pension Fund||Thailand||$12|
|Government Service Insurance System||Philippines||$30|
|Hong Kong Monetary Authority||Hong Kong||$523|
|National Public Service Pension (Nenkin)||Japan||$150|
|Korea Investment Corporation||South Korea||$134|
|National Investment Infrastructure Fund||India||$5|
|National Pension and Provident Fund||Bhutan||$1|
|National Pension Service||South Korea||$575|
|National Social Security Fund||China||$295|
|PFA for Local Government Officials||Japan||$169|
|Public Service Pension Fund||Taiwan||$19|
|SAFE Investment Company||China||$441|
|Teachers' Pension Fund||South Korea||$16|
|Timor-Leste Petroleum Fund||Timor-Leste||$17|
Source: New America