Despite being a growing reservoir of funds under management, this critically important pool of capital is confronting mounting problems collating and disseminating key data in a timely manner.
The ratings house is pinning its growth strategy on a revamped methodology that increases the emphasis on governance to 25 per cent – a timely move considering APRA’s proposed reforms.
Better integration of ESG strategies on the cards
A large majority of asset owners in the Asia Pacific region, including Australia – 90 per cent – say they will go beyond negative screening and look to achieve better ESG integration in the next two years, according to a global survey by State Street Global Advisors.
The survey showed that asset owners in APAC tended to be ahead of their peers in terms of incorporating active ownership as part of a comprehensive ESG strategy, A total of 80 per cent of respondents have some level of ESG engagement with the companies in which they invest, compared with 70 per cent in the US and 58 per cent in EMEA.
The survey was of 475 institutions including private and public pension funds, endowments and official institutions. APAC accounted for 39 per cent of the respondents.
Kevin Anderson, SSGA’s head of investments in APAC, said that there was not a great disparity between countries represented in the APAC section of the survey.
While stewardship and governance was very prominent in Australia, Japan also had a high focus on corporate governance, he said. Hong Kong was introducing a new reporting regime incorporating ESG. And China was the largest issuer of green bonds last year.
Anderson said the trend was not a great surprise. “The number of institutions inquiring about ESG is significantly higher than it was 12 months ago. But the amount of ESG assets is still quite small,” he said. A total of 44 per cent of the global universe had up to 25 per cent of their assets in ESG strategies and 17 per cent had less than half. “So there would seem to be room to grow.”
Some obstacles for further growth, however, that were thrown up in the survey include: cost (59 per cent), limited demand from stakeholders (52 per cent), unclear value proposition (52 per cent) and lack of internal knowledge and capability (52 per cent). Nearly two-thirds of respondents globally also said it was difficult to benchmark performance against peers.
