Asian SRI could catch up with West in five yearsFebruary 2011
Socially responsible investment now has a ‘strong foothold’ in Asia and could soon match SRI levels in the West.
A paper by Geoffrey Williams, chief executive of OWW Consulting in Malaysia, reports that the SRI momentum in Europe and North America ‘is now spilling over into Asian markets, where new opportunities and high returns offer manifold options for fund growth’.
Williams reports that overseas fund managers ‘are already developing new Asian strategies that will put SRI on to a new trajectory’, and suggests that at today’s growth rates responsible investing in Asia could reach that in other markets within five years.
He concludes: ‘This is a tremendous prospect and one that is likely to be exciting and challenging in equal measure.’
The paper, published in a new book, Responsible management in Asia: perspectives on CSR, includes fresh figures from OWW Consulting suggesting there are now 262 sustainable and responsible investment funds in Asia, most of them based in Hong Kong, Japan, Korea, Singapore and Taiwan. If sharia and faith-based funds are included, the total rises to 459.
Weak spots include India, where there are only two funds, and mainland China, which has three.
Williams says one reason for expecting a quickening interest in SRI is that Asia’s stock exchanges are increasingly promoting corporate responsibility in listed companies, partly through recently created SRI indexes in China, India, Indonesia and Japan.
Another sign of growing interest is that Asia Pacific signatories to the United Nations Principles for Responsible Investment (PRI) at August 2010 stood at 166, almost a quarter of the global total.
However, Williams warns there are potential barriers to SRI expansion.
One is the relative lack of interest among asset owners – only six Asian institutional asset owners outside Australasia are PRI signatories. Another is the comparatively poor company disclosure in Asia on CSR issues, making it difficult for those running funds to obtain all the data they need.
Williams cautions that the ‘SRI industry’ that supports funds is also largely concentrated in only three countries – Australia, Korea and Japan. And he says SRI in Asia will inevitably look different from that in the West, even after there has been expansion.
In general, responsible investors in Asia show more interest in social issues than environmental ones, and climate change ‘is not afforded the urgency’ it receives in Europe and North America.
In 2007 OWW Consulting estimated the value of Asian SRI equity-based funds at about $33.2billion (£20.8bn, €24.8bn).
It believes the figure had risen to $50bn by mid-2010, even though total assets under management were damaged by the 2008 financial crisis. The value of SRI assets in Korea, for instance, fell an estimated 10.8 per cent between February 2008 and April 2009.
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