Asian asset owners are increasingly mapping out their respective ESG exposure, naming more managers to support their expansion plans. This is leading to Europe-headquartered managers in particular to build resources in the region, with several focusing on building up an Asian presence by setting up new hub in Singapore.
Regional investors have recently become more interested in shifting from a negative screening approach to ESG to applying a positive-tilt approach to portfolios, overweighting companies with better ESG profiles or selecting best-in-class companies from an ESG perspective, according to Tomomi Shimada, Asia Pacific sustainable investment lead strategist at JP Morgan Asset Management.
The Monetary Authority of Singapore (MAS) is one prominent state-linked asset owner to have expanded its interest in ESG. In early June, managing director Ravi Menon of MAS announced that the Singapore central bank would deploy $1.8 billion of the official foreign reserves to five asset managers for climate-related investments.
It is one of several major institutional investors aiming to funnel more funds into ESG affiliated products, or to use sustainability considerations when investing. Regional banks, pensions and life insurers increasingly want to map out sustainable, ESG and green-related investments.
Alexis Cheang, head of sustainable investment for Asia Pacific at Mercer, told AsianInvestor that “across Asia, more pension funds and central banks turn their minds to sustainable investing and what that means for portfolio construction and asset allocation”.
The MAS's choice of asset managers may prove instructive for would-be investment houses looking to gain more institutional business.
The central bank awarded the mandate to BlackRock, BNP Paribas Asset Management (BNPP AM), NN Investment Partners (NNIP), Robeco and Schroders, reported Citywire on July 5, citing sources. The central bank declined to officially announce the managers or its current sustainable investment exposure.
It is notable that all five managers have relatively large assets under management, with a combined $11 trillion. Plus, four out of the five are European-rooted, where ESG originated and is most advanced, and three are in the process of building Singapore dedicated ESG teams.
Netherland-based NNIP lately announced plans to build up its first responsible investing hub outside the Netherlands in Singapore. Gopi Mirchandani, Singapore CEO from the firm told AsianInvestor the hub will initially be comprised of two to three new hirings and could expand further in the future. Currently, the firm has a 16 dedicated ESG team globally.
The additional Asian staff will help expand its current suite of ESG themed products, which include regional bonds and China A-shares, in coordination with China Asset Management, she added.
“We’ve seen strong consciousness from institutional investors clients and it is a very timing set-up which looks promising for enhancing capabilities,” said Mirchandani.
She noted that Chinese asset owners also offering an area of growth, with the country's regulators having become more willing to discuss ESG developments with global investors. Indeed, she believes this engagement could change ESG landscape over the longer-term given the country’s large investors base and economy size.
BNP Paribas AM is similarly considering establishing a sustainability hub in Singapore, which would involve adding to the two ESG specialists it currently has in the region. The firm has a 25-strong ESG team across the world.
“Over the next two to three years, we will be adding ESG headcounts from our sustainability centre based in Singapore office, which will focus on supporting developmental capabilities in green bonds and ESG-related strategies in Singapore,” Christian Bucaro, head of strategic distributor relationships for Apac and chief executive for Singapore told AsianInvestor.
"Asset owners are increasingly asking how concretely investment teams integrate ESG, how we engage with portfolio companies and how ESG impacts investment decisions," added Paul Milon, head of stewardship Asia Pacific, also from BNP Paribas AM.
Schroders, which is headquartered in London, currently has an ESG team of over 20 specialists globally. A spokesman for the manager told AsianInvestor it will accelerate the buildout of its regional Centre of Excellence for Sustainability in Singapore with new ESG-dedicated headcounts in the coming months. This will include making a senior appointment for the head of Asian sustainability strategy and another three Asian ESG specialists in Asia Pacific by the end of the year.
Meanwhile, Netherlands-headquartered Robeco said it would focus on using its 35 professional global team to expand future products development in areas such as impact investing strategies, while aiming to contribute to specific sustainable themes such as mobility or water.
BlackRock declined to comment on its ESG team size and products structure in Asia. However, it has been expanding its team, adding Paul Bodnar as global sustainable investing head in March and naming two executives as Asia Pacific sustainable investing co-heads in April.
Other fund houses are also eager to demonstrate more expertise in ESG-related products and advisory work. Some are choosing to do so in Singapore.
Eric Nietsch, Asia head of ESG from Canadian Manulife Investment Management, told AsianInvestor the firm has a 25-strong sustainability team including three based in Asia. It is using Singapore as a stepping stone by launching the Sustainable Asia Bond strategy for investors in the city state, and has extended it to investors in Europe this year.
France-based $2 trillion asset manager Amundi told AsianInvestor that it had a team of 37 dedicated ESG experts as of March this year. They include Sylvia Chen, who joined as a senior ESG analyst in Singapore in February, and Kristy Wong, who was hired as an associate director for ESG investment in Hong Kong in June.
As of March this year, Amundi's ESG assets under management (AUM) stood at €705 billion ($836.12 billion), compared to €378 billion at the end of December 2020.
US fund house JP Morgan Asset Management, meanwhile, had a team of 23 ESG experts globally as of June this year and is “actively looking to expand the client solutions team by adding another sustainable investing strategist in Asia Pacific”, according to Tomomi Shimada, lead Asia Pacific sustainable investment strategist.
The demand of these fund houses to expand their businesses is down to a growing fervour for ESG investing among asset owners across the region.
This includes some of the region's most prominent players. In September 2020, China’s The National Council for Social Security Fund issued its first mandate for overseas equities with a focus on ESG, while South Korea's National Pension Service plans to allocate as much as half of its assets to ESG investments by the end of 2022, noted Cheang.
Plus, in June last year, Taiwan’s Bureau of Labor Funds (BLF) announced a plan to appoint five managers for a new global fixed income mandate that focuses on ESG factors.
This article has been updated to correct the number of ESG specialists Schroders is adding in Asia Pacific, and to include Christian Bucaro's full name and title.