Asia may be lagging the rest of the world in socially responsible investing in general, but there is one aspect in which the region comes out on top: stewardship code adoption.
‘Asia is ahead of the curve in terms of stewardship code adoption,’ Kerrie Waring, executive director of investor-led organisation ICGN, said at a panel discussion on ‘The responsible investment landscape in Asia’ at the PRI in Person 2016 conference being held in Singapore.
The conference is being held by the UN-supported Principles of Responsible Investment.
‘There’s no other region in the world developing as many stewardship codes as Asia,’ Waring said.
‘We’ve got corporate governance codes in Hong Kong, Japan, Malaysia and Taiwan. South Korea and Thailand are currently developing stewardship regulations.’
According to Waring, Asian governments and companies are working on how to conduct stewardship effectively in a company under the control of a dominant shareholder.
‘Governance and stewardship models need to pay more attention to the rights of minority shareholders,’ she said.
Co-panellist Kevin Gibson, CIO, equity at Eastspring Investments added: ‘The reality in Asia is that families own majority stakes of many listed companies. While we don't engage in negative screening of these companies, we do try to understand the risks and impact it might have in terms of sustainable returns.’
Stewardship codes, a set of corporate governance principles, were first released by the UK’s Financial Reporting Council in 2010 and were directed at institutional investors with voting rights in UK companies.
Another panellist, Ong Boon Hwee, CEO of Stewardship Asia, a centre focused on improving corporate governance standards in Asia, added: ‘Sovereign wealth funds in Asia are beginning to be more differentiating in their investing process and more understanding and there is a clear shift towards sustainable investment. They are beginning to veer towards reporting as well.’
Another issue discussed was the gap between the level of responsible investing expected by investors and the perception of issuers and companies of investor demand.
Special adviser to the Singapore Exchange Lian Sim Yeo said that Singapore’s stock exchange held a survey a few months ago to gauge investor and issuer sentiment on responsible investing and found a discrepancy.
‘We asked issuers what they thought are the most important elements for responsible investing? Their response was labour practices, safety and operational efficiency.
‘Most investors, meanwhile, said supply chain standards was their number one concern. Surprisingly, number two and three were water and climate change, respectively. Anti-corruption also featured high on the list.
‘All these concerns were on the issuer list, but much further down.’
According to Yeo, the survey also found that investors were using third party information providers to find out the ESG orientation of companies.
‘Companies think that there is no investor interest in ESG because investors don't speak to them directly.'
The communication between companies and investors clearly needs to improve, Yeo added.