Peter Webster: Six reflections on the state of responsible investment in Asia

The progress which Asian companies and investors are making on ESG issues

Having recently met investors at the excellent RI Asia conference in Singapore – and at other investor meetings in Hong Kong, South Korea and Japan – I’m struck by the determination and progress which Asian companies and investors are making on ESG issues. I imagine everyone has their particular conference highlights, but here are my top six.
The determination of the Singapore Stock Exchange that sustainability issues mattered more for Asia than for most other parts of the globe and CEO Magnus Böcher’s continuing commitment to engage with companies listed on the exchange to pursue that agenda despite present low levels of reporting. We agree with that analysis, as we do presently tend to rate Singapore as one of the lower scoring countries on our PRI Disclosure Ratings.
And for those who haven’t checked it out, you can see the results of the Hong Kong Exchange’s consultation announced last year which rolls out for reports post December 31 2012 by clicking here. HKEx also plans to adopt a comply or explain requirement by 2015. These sorts of initiatives and this level of commitment have the potential to leave other stock exchanges behind as the pressure for sustainable stocks exchanges also grows amongst longer term investors. You can see some of the drivers for these developments in our report What’s driving ESG in emerging economies.
Then there’s the whole issue of sustainable levels of taxation that Rebecca Lewis of Arisaig Partners gave such prominence to. We encouraged a slightly similar debate with UK development NGO Christian Aid and you can read a summary of the outcomes in EIRIS’ blog on taxation.This issue appears to be climbing up the agenda in many different ways. That key fact about the second largest investor in China being the British Virgin Islands (with investment flows exceeding those from the US) so clearly crystalizes the issue and underlines Rebecca’s question about whether this can really all be sustainable in even the medium term.

The session on sustainable banking: its importance in the region as a funder for a number of key players where the sustainability challenges are most acute and the interesting role that WWF is seeking to play in encouraging banks to tackle those challenges. The EIRIS Foundation ran a couple of seminars at Windsor Castle in the UK and in the US together with UNEP FI to let ESG specialists in banks discuss the practicalities of the challenges they face.

We would be happy to provide a summary of the outcomes of those events (and the ideas they came up with) if you are particularly interested. One key idea was that banks should act collaboratively to control risks (and manage the reputation of the sector as a whole), but competitively when it comes to offering banking products that seek to address the sustainability challenges we were all discussing. That gives hope that there should be significant potential for collaboration between global and local/regional banks on the risk side (including potentially with those on the platform). The WWF project looks like a practical means to harness some of that potential willingness to work together.
The ’in your face’ nature of the sustainability challenges in China whether they be food safety, pollution, labour issues or corruption makes it so clear that we are all tackling live and immediate issues.

This is not some ivory tower discussion amongst theorists from far away. The challenge is how to convert that day-to-day reality into practical investment processes, and into engagement or other initiatives that really make a difference to that day-to-day experience. That, I guess, is what drew many of the attendees to spend their time in Singapore, and hopefully everyone came away with lists of action that they could take to move things forward.
It was also very interesting to hear the view that corporate governance in Asia often advances as a top down initiative of governments (perhaps with the encouragement of global investors) and not so much as a bottom-up movement led by angry local shareholders as has happened in some other places.When Asian commentators point out that governance doesn’t always work too well in London or New York many of those striving to advance good governance in these places would probably whole-heartedly agree. They are often not at all sure they have yet won the argument!
And finally if the focus on yield and efficient farming is a way to produce palm oil without forest habitat destruction, that would indeed be an extremely useful win-win outcome as some of the panellists suggested.

Peter Webster is Chief Executive Officer of EIRIS