Ethical Investment: The Growing Focus on ESG Issues in Asia
With the tremendous growth potential in Asia continuing to attract substantial Western capital, investors entering the market have tended to prioritise economic fundamentals. However, as environmental, social and governance (ESG) issues emerge in this developing region, investors are increasingly focused on the quality of their investments beyond the financials.
There is growing realisation that concerns over workplace safety and corruption issues, for example, can have a significant impact on returns. In the worst-case scenario, ESG problems could result in liability for damages, harm corporate reputation and brand, or undermine confidence in a company, thereby affecting its long-term prospects in the region.
As ESG issues affect even established operations and leading brands in Asia, investors are starting to appreciate that a holistic approach to risk management should include a focus on ESG. Moreover, with governments in Asia strengthening their regulatory mechanisms and enforcement capacity, investors interested in the long-term outlook for the region need to be prepared.