If there’s one important lesson to learn from 2022, it’s that ESG (environmental, social, and governance) investing can provide resilience to a portfolio, and even enhance its performance, in a most challenging year for financial markets.
Equities, for example, had its worst year since 2008 with the S&P 500 finishing the year down nearly 20%. Fixed income also experienced its worst year since 1976, based on the Barclay’s US Aggregate Bond Index, ending the year 13% lower.
Based on an analysis of the results of the ESG Asset Management Company of the Year and ESG Fund Manager of the Year awards, the best performing ESG funds exhibited resilience, flexibility, and the right sector allocation, not necessarily in that order. These factors actually overlap.
The key is to be able to balance the ESG factors with generating performance even in a market downturn in order to attract investors into ESG funds.
Resilience means being able to identify and ride the trends to generate performance. In 2022, the key trend that helped ESG fund managers was the rising interest rate environment in the second half of the year.
Flexibility means the ability of the fund manager to allocate to the right sector in a timely manner. The “right sector”, in this case, means “financials”.
Financials were able to ride the rising interest rate trend, making the sector more resilient during the market downturn. Financials may not be among the core ESG sectors such as renewables, but they have relatively good ESG track records based on their ESG scores.
One example of a fund that highlighted these three factors is the “Fidelity Funds Sustainable Asia Equity Fund”, managed by Dhananjay Phadnis, which was able to beat the benchmark despite the very challenging market conditions.
In 2021, the fund had substantial allocation to both the financial and technology sectors, which allowed it to outperform that year. In 2022, the fund overweighted its allocation to financials to ride the rising interest rate trend. But it underweighted its allocation to technology, which was performing badly like most sectors. In this way, the fund was able to balance the ESG factors with the performance.
It is in this context that we announce the winners of the ESG Asset Management Company of the Year, ESG Fund Manager of the Year, Investor of the Year, and Fund Manager of the Year awards.
ESG ASSET MANAGEMENT COMPANY OF THE YEAR AWARD
Fidelity International wins ESG Asset Management Company, Asia – Overall, and ESG Asset Management Company, Asia – Retail
In 2022, Fidelity International had the best and most experienced sustainability team in Asia among the global fund managers. It also had best performing ESG funds and the most extensive distribution network in the region. Despite a challenging year for the markets, Fidelity’s ESG strategies displayed relative resilience, outperforming their benchmarks.
BNP Paribas Asset Management wins ESG Asset Management Company, Asia – Highly Commended
BNP Paribas Asset Management proved itself to be among the industry leaders in terms stewardship, engagement, and innovation. In May 2022, the firm launched the Sustainable Asian Cities Bond fund, which focuses on developing Asian cities sustainably in light of the challenges of increased urbanization, climate change, and inclusive growth. This is the first Asia-focused fixed income strategy in the market classified as SFDR Article 9.
Robeco wins ESG Asset Management Company, Asia – Institutional
Robeco continued to be a leader in the institutional investment space. It won mandates from key sovereign wealth fund clients and launched a suite of sustainability and low-carbon products. It also launched the “Open Access Initiative”, which was designed to share its extensive SDG Framework with clients and third parties to promote and encourage research, data, and information by offering free insights into individual company SDG scores.
China Asset Management wins ESG Asset Management Company, China
China Asset Management Company’s (ChinaAMC) ESG funds outstripped the benchmark with substantial excess return. It has been building an in-house automated proxy voting system designed for more active participation in listed companies’ governance. ChinaAMC is also the first Chinese asset manager to sign up to the United Nations-supported Principles for Responsible Investment (PRI), and the first Chinese asset manager to establish a firm-level ESG committee for supervising the implementation of the company’s ESG ambitions and strategies.
Ping An Asset Management wins ESG Asset Management Company, China – Highly Commended
As a PRI signatory, Ping An Asset Management continues to be an active player in ESG incorporation in China. Last year, the asset manager rolled out a dedicated ESG investment product looking into long-term ESG opportunities in the Chinese bond market. The firm also actively engaged in meaningful conversations with selected companies in their investment portfolio.
Cathay Securities Investment Trust wins ESG Asset Management Company, Taiwan
Cathay Securities Investment Trust integrates ESG impact and risk indicators into its portfolio through negative screening, positive screening, self-compliance PRI principles, climate risk list, corporate governance evaluation list, and high concern list. Their in-house ESG Information Platform provides ESG resolutions that help investment managers and researchers identify ESG performance in the investment portfolio. The firm has also been actively conducting ESG engagement, as a result of which some of the companies in the portfolio improved their ESG performance and were selected into ESG indices.
Editors’ Triple Star
BNP Paribas Asset Management
BNP Paribas Asset Management’s Sustainable Asian Cities Bond Strategy aims to capture the growing “greenium” against the continued strong urbanization trend in Asia. The investment process consists of four major processes – Sustainability Centre inputs, list of potential bonds, macro positioning, and the last step of credit selection, portfolio construction and risk management.
Robeco launched its Sustainable Investing Open Access Initiative to share its extensive SDG Framework with clients and third parties to promote and encourage research, data, and information by offering free insights into individual company SDG scores. Launched in 2022, this is an important step in making SDG scores and methodology open for clients and academics to facilitate standard setting and thought leadership needed in the industry.
CICC Asset Management
As a PRI signatory, CICC Asset Management adopts four methods to implement responsible investments, namely ESG integration, thematic investing, screening, and active engagement. It has developed an in-house ESG evaluation methodology covering various asset classes including equity and fixed income, and has embedded ESG rating in the research, investment and risk control processes. Its ESG rating system for bond issuers has been widely recognized by the domestic market.
INVESTOR OF THE YEAR
National Pension Services, Korea (NPS) wins Pension Fund Investor of the Year – Asia
In 2022, the National Pension Services, Korea (NPS) managed to stabilize its portfolio despite the challenging market conditions. It continued to expand its overseas network and investments including a freeway, an electricity distribution company in Australia, an office tower in Singapore, and investments in in India.
ROC Private School Pension Fund Management Committee wins Pension Fund Investor of the Year – Taiwan
As the first pension plan in Taiwan that provides choices for members, ROC Private School Pension Fund Management Committee offers three different portfolios in the format of a fund of funds on a platform, including conservative portfolio, steady portfolio and aggressive portfolio. In spite of the complex market conditions last year, the pension managed to maintain a relatively stable performance.
ESG FUND MANAGER OF THE YEAR
Fidelity Investments’ Dhananjay Phadnis wins ESG Fund Manager of the Year – Asia Equity
“Fidelity Funds Sustainable Asia Equity Fund”, managed by Dhananjay Phadnis, was able to beat the benchmark despite the very challenging market conditions. This is the second year in a row that the fund has won this distinction.
FUND MANAGER OF THE YEAR, EQUITIES – CHINA
Fidelity Investments’ Nitin Bajaj and Alice Li wins Fund Manager of the Year – Equity China
“Fidelity Funds – China Focus Fund”, managed by Nitin Bajaj and Alice Li, was able to outstrip the benchmark with outsized excess return amid the heightened market volatility.
For the full list of awardees, please click here.