Pragmatic

Why Asia's ESG Investing Method is Like Comparing Apples to Oranges!

Asia is taking a distinctly pragmatic path in ESG investing, leaving the EU scratching their heads. Discover why!

In recent years, the importance of Environmental, Social, and Governance (ESG) investing has gained momentum across the globe. However, it seems that Asian investors are taking a different route compared to their Western counterparts, especially those from the European Union. According to Thomas Chinery, co-lead portfolio manager at a prominent investment firm, Asian investors are embracing a more pragmatic approach that may diverge significantly from the more regulatory-driven EU methods.

One of the key reasons for this approach is the unique market dynamics of Asia. Investors in countries like the Philippines, Indonesia, and Vietnam often deal with rapidly evolving economies and a range of socio-political challenges that require adaptable and practical solutions. The focus here is often on immediate returns and the practicality of investments rather than adhering strictly to ESG frameworks. Consequently, many Asian investors prioritize tangible benefits and near-term profitability, which can lead to a distinct variance in ESG practices aimed at long-term sustainability versus short-term economic growth.

Moreover, cultural factors, regulatory environments, and investor expectations play a crucial role in shaping ESG strategies in Asia. While European countries may emphasize compliance with ESG criteria and policies, Asian markets tend to focus on their specific contexts and how ESG investments can truly impact local communities and environments. This local adaptation is believed to foster more meaningful change, as investments are aligned with the realities of those they aim to benefit.

In summary, the contrasting approaches to ESG investing between Asia and the EU reflect broader economic philosophies and societal norms. By opting for a pragmatic method, Asian investors are not only navigating immediate challenges but also embracing opportunities for innovation and growth. The distinctive lens through which they evaluate ESG is fostering a more grounded and potentially impactful investment landscape.

Interestingly, as of 2021, ESG investments in Asia have been predicted to grow at a rate of over 20% per year, significantly outpacing global averages. Furthermore, a survey revealed that 70% of Asian investors are prepared to sacrifice some degree of profitability in order to align better with their local communities and make environmentally conscious choices. Could this be a new wave of pragmatic investment that the rest of the world might soon follow?