Asia continues to lag other regions for integrating ESG principles with investing; better data and stronger regulatory requirements will help institutional investors, market observers say.
Hugh Young, Singapore-based managing director and co-founder of Aberdeen, says the plan is to continue look after its minority shares in the companies in its portfolios, which is already a tall order. There are no plans for Aberdeen to assume a more pro-active role in the region, such as that played by Sovereign Asset Management in South Korea in recent years.
Sovereign figured in a high-profile, two-year campaign to improve corporate governance at SK Corp., South Korea's largest refiner. The Dubai-based investment fund eventually sold its roughly 15% stake in SK Corporation in July 2005 after failing to unseat chairman Chey Tae-won, who was convicted that year for accounting fraud at a company affiliate.
When circumstances call for it, which was the case with the Malaysian Oxygen buyout, Aberdeen will take a more pro-active stance.
ôMalaysian Oxygen had set a price that we thought was unfair and we challenged it. We led a shareholder crusade of two û us and one of our clients û and we managed to get a higher bid. That was probably the most satisfying development in my career in the last few years,ö Young says.
LindeÆs initial offer for the Malaysian Oxygen shares it didnÆt already own was considered acceptable by an independent financial adviser, but Aberdeen felt the price was too low in relation to the companyÆs potential earnings growth. Many Malaysian Oxygen investors accepted the offer, fearful of a possible delisting of the shares in the event that they reject it. But Aberdeen, which held a blocking stake of more than 10% of the outstanding shares, sought a higher price. As a result, Linde eventually revised its offer price to RM17 per share from RM15 per share.
ItÆs unlikely that Aberdeen will fight every fight. ôWe have to be realistic and choose our battles,ö says Taylor. Before joining Aberdeen, Taylor was working on corporate governance issues at the private equity group of the International Finance Corporation.
Taylor, who also manages funds at Aberdeen, says corporate governance isnÆt considered a separate part of the investment process at Aberdeen. There is no dedicated team under Taylor handling corporate governance issues and there is no separate corporate governance-themed fund.
ôEveryone needs to be conscious of corporate governance issues,ö Taylor says.
Among the basic considerations Aberdeen has before investing in a company is its controlling shareholders, and among the key questions Aberdeen asks are: who are they, can we trust them, how solid is their control?
Once Aberdeen has invested in a company, the next step is ensure that it attends annual general meetings and other relevant meetings and votes whenever a vote is called for.
Convincing companies to make better use of their cash holdings is about as pro-active as Aberdeen gets on a regular basis.
ôWe have in our portfolios some operationally well-run companies which have been lazy with their balance sheets. Some of them are terribly conservative and are sitting on hundreds of millions of dollars. We always ask what these companies plan to do with their cash,ö Young says.
Aberdeen manages around $50 billion in assets in Asia mostly from institutional investors û around $40 billion of which are invested in around 300 stocks in the region and the rest in bonds. A long-term investor, AberdeenÆs average holding period for shares is seven to eight years, including Swire Pacific, Dah Sing Banking Group and Wing Hang Bank to name a few.
The appetite of institutional investors for green, social, and sustainable bonds that bring clear environmental and socio-economic benefits shows no sign of waning.
The German insurer has plans for the property sector in Australia and China too.
Global investors are advised to look selectively at Japanese equities as the country recovers from lockdown and continues to improve corporate governance.
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