APAC struggles with sustainable practices in ESG areas

The region ranks second to last in terms of the human rights index.

The Asia Pacific (APAC) region lags significantly behind global standards when it comes to implementing sustainable practices across key environmental, social, and governance pillars, according to a report by KPMG and Quinlan & Associates.

The report, titled The Value of Investing in Values – The ESG Opportunity for APAC Asset Managers, found that the region ranked the highest in terms of natural hazard risk, followed by Latin America, the Middle East, Europe, and North America.

In terms of social sustainability, APAC ranked second to last in terms of the human rights index, which measures the extent to which people have access to basic human rights such as freedom of movement and expression, property rights, and religious freedom. The Middle East ranked the lowest in this regard, followed by Latin America, Europe, and North America.

APAC fared better in terms of governance, ranking third in terms of the percentage of women on boards. Europe ranked first in this regard, followed by North America, Latin America, and the Middle East.

Source: The Value of Investing in Values – The ESG Opportunity for APAC Asset Managers Report

The report also highlighted that a growing number of regulators in the region are localizing ESG-related requirements in their home markets, and end-investors including pension funds, sovereign wealth funds, and high-net-worth individuals are increasingly taking sustainable practices into account.

The report suggested that non-adherence to rapidly-evolving ESG standards will leave regional asset managers open to sizeable reputational risks and create capital-raising challenges. However, it also noted that there is considerable potential for firms to become true "market leaders" in the ESG space, attracting considerable ESG-related capital inflows.

Source: The Value of Investing in Values – The ESG Opportunity for APAC Asset Managers Report

The publication presents a range of strategic and operational considerations for APAC asset managers who are embarking on their ESG transformation journeys, including in areas such as stakeholder analysis, product development, investment process, data and technology, governance, talent, and key measurements.

The report's overarching theme is that ESG is not "something" you do – rather, it is "everything" you do. Asset managers should aim to integrate ESG across their entire organization and corporate culture. There is value in investing in values.