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Asian pensions funds pioneer responsible investment
Singapore: Asian pension funds could be the key to implementing environmental, social and corporate governance guidelines, according to the Association for Sustainable & Responsible Investment in Asia (Asria).
Asria has produced a report - The Time to Lead is Now: The Adoption of ESG Analysis by Asian Government Pensions Funds – backed by the Asian Development Bank (ADB). Asria executive director Wai-Shin Chan said that with renewed strategic focus and commitment to embracing best practice for ESG adoption, Asian pension funds could leapfrog to become global leaders.
According to the research, several large state pension funds in Asia are developing corporate governance guidelines and proxy voting policies. The National Pension Corporation in Korea, the Employees' Provident Fund in Malaysia, the Government Pension Fund in Thailand and the National Social Security Fund in China have all implemented such guidelines.
That said, most Asian pension funds are behind in ESG adoption. On the positive side, the report indicated that it is easier to incorporate ESG factors into a newer investment portfolio, rather than into a well established one.
Most Asian pension funds' assets are largely invested in domestic government and corporate bonds., but there is a desire to look further afield. Wai-Shin Chan said: "As pension fund investors seek to match their liabilities with long-term returns, they need to identify investments which demonstrate security and longevity in the face of fundamental environmental and social challenges."
Thanks to a long-term view, there is an opportunity to prioritise investments, which demonstrate longer-term sustainability.
ADB private sector operations department director, Philip Erquiaga said that it is crucial for pension funds to maximise their returns in the current economic crisis, in a way that directs investments into projects that ensure long-term sustainable development. He urged: "Now is an opportune time for these nations to adopt investment policies that use traditional investment analysis together with analysis that incorporates environmental, social and governance factors."
