ESG is the Way Forward

Over time, ESG investments in Asia have transformed from a passing trend to a more sustainable approach to investing. Despite recent global macroeconomic and geopolitical events in Asia, investor interest in national climate and development policies, energy security, and sustainable financing has not decreased.

The rise in popularity of ESG investing has given rise to investment options like ESG integration, climate investing, and more general sustainability and social issues. A portfolio's value can be significantly impacted by potential sustainability risks, such as climate change, physical risks from stranded assets, and potential supply chain liabilities frequently brought on by regulations or laws, if ESG factors are taken into account when making investment decisions. Active ownership boosts portfolio value and helps organisations achieve better ESG results.

Second, the global climate agenda will continue to offer opportunities given the investments required for economies to decarbonize. There will be a need for climate technology, including renewables, electrification, and energy storage, when net zero paths are adopted. This raises the possibility of new advancements in the manufacture of battery cells, semiconductor technology, or component suppliers for the solar and wind industries in the bigger supply chain for climate solutions. Third, there is expected to be increased interest in more general sustainability concerns like biodiversity and natural capital. Biodiversity loss was recognised as one of the top five global dangers for the ensuing ten years by the World Economic Forum, and the TNFD framework would be implemented between 2020 and 2022. (Taskforce on Disclosures of Financial Information Related to Nature). The increased focus on natural capital may present opportunities in the food, agricultural, and water industries.

Every investment carries some risk. ESG investing includes, among other things, considerations for varying national standards, data security concerns, and sustainability risk outcomes. Nevertheless, we are upbeat about a number of areas, including the environment and sustainable thematics, given that these issues should have significant development tailwinds. As investor sentiment moves in favour of an investment strategy that is more sustainable, we think that ESG investments have a bright future in Asia.