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Global Sustainable Investement Alliance

Asia (excluding -Japan) As Asia’s share of the global economy continues to rise, investors based outside the region are increasing their exposure to Asian public and private markets. Against this backdrop, the development of an Asia-based sustainable investment industry has taken root, driven both by capacity growth of regional investors and global investors placing investment staff in Asia. It is increasingly clear that Asia will play a key role in the future development of the sustainable investment industry. As of year-end 2011, over 130 investment managers in Asia were using sustainable investment strategies, with US$ 74 billion of identified sustainable investment assets under management (AUM) in the region including Japan. For Asian markets outside Japan, identified sustainable investment AUM totaled US$ 64 billion. Asset management based on a range of sustainable investment practices has a growing foothold in the region’s public markets, particularly for listed equities. Sustainable investment in private markets (private equity, real estate, infrastructure, etc.) tends to be limited to a themed investment approach, for example, in environmental technology. Ten infrastructure fund managers involved in sustainability- themed strategies are based in Asia. In addition, 52 private equity managers based in Greater China currently invest, or plan to invest, in environmental technology, committing allocations of over US$ 19 billion. Lack of credible ESG data has often been cited as a key obstacle to sustainable investing in the region. Market exchanges in Asia are getting a well deserved reputation for taking ESG disclosure more seriously by issuing ESG guidelines for listed issuers. With exchanges from Hong Kong to Malaysia to Thailand increasing their oversight in this area, there is an expectation that sustainable investors in public equities will benefit with more material ESG data. Regional bond managers using an ESG integration approach lag behind their peers in listed equities. The expected increase in reliable ESG data is an opportunity for bond managers to take these disclosures more seriously, as ESG-related event risk, spurred by extreme weather events, environmental disasters, and labor unrest, has been shown to affect credit analysis and cost of debt. For global investors headquartered in Asia, sustainable investing is still a relatively new practice. Due in part to ASrIA’s work over the past ten years, there is considerable evidence that these investors are increasingly aware of the concepts of sustainable investment and ESG integration. However, there is a distinction between being aware of the concept and having the experience and tools needed to put ESG integration and other relevant methodologies into practice. A small but growing cohort of asset owners, such as Korea’s National Pension Service (NPS), are actively building capacity in this area. The US$ 306 billion NPS has allocated a growing share to sustainable investment including in mutual funds and customized mandates. From year end 2009 to 2011, NPS’s allocation to sustainable strategies grew 36 percent annually, reaching nearly US$ 5.5 billion. Global Sustainable Investment Review 2012 28


Global Sustainable Investement Alliance
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