Keeping an eye on factors like social justice and environment while investing is slowly taking root in Asia
In the past few years the issue of sustainable and responsible investment (SRI) in Asia has taken a small but firm foothold in the region. Leading the pack are Japan and Australia, where SRI funds have close to US$10 billion in assets under management, according to a report published recently by the Association for Sustainable and Responsible Investment in Asia (Asria). Closer to home, Hong Kong investors now have a modest range of SRI funds to choose from, in the global and Asian regional sectors.
Although there are many shades of SRI, it can be broadly defined as investment which takes into account concerns such as social justice, economic development, peace and the environment, as well as conventional financial considerations. There are three main types of SRI - portfolio screening to exclude or include companies according to certain socially responsible criteria; shareholder engagement, whereby investors actively engage with companies to improve their behaviour; and community investing, including micro credit and revolving loan schemes.
The Asria report, 'SRI in Asian Emerging Markets', looks at what has been achieved over the last two to three years in the quest to bring SRI to Asia. What became apparent is that activities on many levels, from investment funds and corporate governance to micro-finance and social activism, are all contributing to the growing interest in SRI issues, according to Asria's newly appointed executive director Melissa Brown.
'After Australia and Japan the next market that currently shows the most potential for near-term development is Korea, both in terms of investable companies and the development of domestic funds,' she says. 'For the long term, it's no surprise that India and China are the biggest potential markets.'
One of the drivers for SRI in Asia is the greater attention that governments, institutional investors and corporations are paying to corporate governance.
As SRI is one means of assessing risk, it goes hand-in-hand with corporate governance, says Ms Brown. 'Shoring up the performance of listed companies and looking at SRI both require the same thing - better disclosure from companies.'