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Asian and Western investors differ in ESG priorities
Social impact a major focus in UK while climate concerns rise in Asia
Tom King 13 Apr 2022

Two recent surveys have revealed a schism in the priorities of those investing in environmental, social, and governance (ESG) products in Asian and Western jurisdictions. 

In the United Kingdom, for example, most investors, when given the choice, would opt for products that tackle social needs over environmental challenges, a study by social impact investor Big Society Capital finds.

Respondents were invited to choose three options across a range of social and environmental causes regarding their investment preference. According to the survey, more than half (57%) of all under 45-year-olds, and two-thirds (67%) of all under the age of 25 chose social impact investments of different types rather than an environmentally motivated investments.

Those under the age of 25 prioritize investing in areas making a positive social impact. Health and well-being issues attracted the most interest among those aged 18 to 24. Almost four out of 10 (39%) said they would choose to invest their money in this area – for example, in a charity promoting mental health – before environmental protection, which is selected by 33% of respondents.

However, the survey of UK adults with at least one investment outside of their pension shows that age does impact motivations toward responsible investing. As people age, they seem to become more concerned with investing in solutions addressing environmental protection.

For 25-year-olds and over, green issues top the list of preferred impact investment areas with the proportion of people selecting this increasing as they get older. For example, 42% of those aged 25 to 34 would want to invest in environmental protection, compared to considerably more, 57%, for the over-55s.

Climate focus

Meanwhile, another study finds that the momentum and commitment to tackle climate change continues to grow among Asian-based investors, with increasing adoption of thematic investing, active ownership and biodiversity protection.

Robeco’s The Global Climate Survey 2022 finds a significant increase in interest in environmental issues, with 70% of respondents saying that climate change is either at the centre of their investment policy or a significant factor, up from 57% in 2021.

The survey covered 300 of the world’s largest institutional and wholesale investors across Europe, North America and Asia-Pacific, representing a total of around US$23.7 trillion in assets under management.

When looking at the approach to the United Nations Sustainable Development Goals (SDGs), 57% of investors in Asia consider those pertaining to climate as major categories.

However, Asian investors trail their Western counterparts in biodiversity adoption with only 31% of those based in Asia viewing biodiversity as central to their investment policy or as a significant factor today (57% in Europe, 31% in North America). The focus on this area is projected to increase to 52% in Asia in the next two years.

Transparency concerns

Thematic investing is the most widely used ESG strategy among Asian investors, with 40% implementing it as a high or core priority and 31% doing so as a low priority. This is followed by climate change (40% high, 24% low) and negative screening (36% high, 31% low).

For both sets of investors, however, the lack of ESG data and uniform regulation remains an impediment to further investment.

Similar to their Western peers, Asian investors see global coordination on regulation as key to effectively tackle issues such as climate change and decarbonization (77% in Asia, 90% in Europe, 77% in North America). However, they also think it is difficult to keep up with new regulations on classifying the sustainability of different investments and ESG disclosures, more so than in other regions (75% in Asia, 63% in Europe, and 61% in North America).

Both Asian and Western-based investors concur that they need more transparency and better metrics on climate change, not more regulation (74% in Asia, 67% in Europe, and 68% in North America).

When asked about the biggest obstacles in moving to a net-zero economy, 63% of Asian investors highlight the lack of global agreement on policies (e.g., regulation and taxation) to help capital markets direct funds away from carbon-intensive activities and towards more sustainable activities.

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