Companies in Asia now consider environmental and sustainability issues as among the top three considerations in managing risk. This coincides with both investors and regulators in the region increasingly shifting attention to sustainability in business practices.
This is also coming at a time when investors in the United States are being increasingly challenged especially over the past year on their adoption of environmental, social and governance (ESG) principles in their investment decisions.
The entry of politics into ESG has spread even to Australia. One of the largest companies in India, which met with investors down under recently, shares: “The feedback from some of our conversations is that there is no more ESG agenda; it’s all politics that’s driving it. Once it is politics, the financial community will not participate as it is difficult to engage; we are in business. Unfortunately, it seems to be spreading from North America now to Australia.”
A survey conducted by Asset Benchmark Research (ABR), the data analytics unit of The Asset, reveals that fraud control is now the number one consideration among respondent companies surveyed, climbing from seventh position a year ago. Ranked second most important area of risk management is business continuity.
Together with environmental/sustainability, all three factors are in response to accelerating changes in Asia-Pacific as the region exits from three years of the pandemic, an analyst at ABR explains. Fraud control is a function of digitalization of businesses in response to the Covid-19 health emergency. Financial service providers ABR analysts spoke with share how Covid-19 became the most powerful driver in moving businesses to embrace technology as lockdowns halted and threatened businesses that relied only on brick-and-mortar models.
Business continuity and environmental/sustainability are interlinked. Indeed, business continuity has been a focus of companies in managing risk for the past three years, the survey reveals. On the one hand, companies needed to adapt to new ways to stay in business as the health emergency upended practices from how companies generate revenues to their procurement and supply chain function.
On the other hand, it also relates to efforts by regulators especially during the past 12 months in providing guidance and clarity to companies on how they should approach issues such as transitioning business to adopting green practices and addressing the myriad of social issues in the aftermath of the Covid crisis.
In the first six months of 2023, for example, regulators have come up with landmark pronouncements that set the stage for the region’s pathway to adopt green and sustainable practices. These are landmark issuances as they take into consideration the region’s developmental priorities.
The Asean Taxonomy for Sustainable Finance Version 2 published at the end of March 2023, and the final public consultation on green and transition taxonomy for financial institutions launched by the Monetary Authority of Singapore in mid-February 2023, are among the documents that now provide important references for companies.
The lack of definition on what constitutes transition – and eventually moving to a common taxonomy across the region – has impeded financial flows as banks and investors hesitate over worries their involvement may constitute “transition-washing”. If transition finance is to go mainstream, therefore, regulators are especially crucial and will need to play their part with solid frameworks that provide credibility and clarity.
Pressure from investors for companies in Asia to adopt ESG practices is not just coming from European funds. Asset owners and investors of Asia-domiciled funds are likewise increasingly paying attention to ESG matters in companies.
According to another survey, part of the ESG priorities in China: How companies in China are approaching ESG report published by Fidelity International, the levels of ESG adoption and awareness among listed companies in China “are robust and maturing”.
China’s appetite to bring ESG into the corporate agenda is not only on the rise but is here to stay. “Two thirds of companies surveyed plan to review focal areas for ESG in the coming 12 months, while over half of companies plan further investment in building tech and data capabilities to improve efficiency in ESG data collection,” the survey points out.
Fidelity notes this will be crucial in enhancing transparency as data collection remains the key obstacle to progress on ESG disclosure, cited by 52% of companies. Apart from ESG strategy review and data collection enhancement, 47% plan to review their ESG quantitative targets, a strong signal to internal and external stakeholders on the commitment to stated goals.
The Asset ESG Corporate Awards 2023 is similarly focusing on these critical imperatives. As the region’s longest-running programme of its kind recognizing outstanding ESG achievements, these awards bring together the companies that have embraced ESG as a matter of corporate practice, enabled their organizations to disclose, track, and measure ESG metrics, and with these additional steps, raise the bar for similar organizations to aspire towards their own pathways to net zero.
This year’s awards further refine the basis for winning the much-coveted The Asset ESG Corporate Awards based on three foundational principles: intention, disclosure, and performance.
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For more information about the awards and the process to apply, please click here. Submissions are open until July 28th 2023.