Asia starts paying attention to ESG as climate change issue

Bloomberg

Hiro Mizuno, former chief investment officer of Japan’s GPIF, the world’s largest pension fund, has recounted how Kofi Annan once said to him that Asian nations were a “desert” of responsible financing.
Mizuno told the story in 2019, two years after he began to champion investing based on environmental, social and governance metrics. Things have changed since then.
Asia was the fastest growing region for ESG debt issuance in 2021, according to Bloomberg data, though it was off a small base. Japan has the lowest proportion of its total managed investments that would qualify as “sustainable,” compared with the rest of the world, according to the most recent Global Sustainable Investment Review. (The rest of Asia isn’t included.)
South Korea and Japan both ranked behind Sweden — which has a much smaller economy — for green bond issuance in 2021, according to the Climate Bonds Initiative.
Tae-Han Kim, a senior expert at the Korean Sustainability Investment Forum, said ESG was still in the early stages in that country, and the focus was on disclosure. “Unlike Europe and the US, Korean financial institutions are not familiar with corporate engagement,” he said.
The recent emergence of climate-focused shareholder resolutions in Japan is instructive. A shareholder resolution was filed against J-Power, the coal-intensive Japanese power company. It’s the first such resolution in the country to be co-filed by institutional investors, after three were filed by nonprofits in the past two years. Still, all of those institutional investors instigating the J-Power resolution are Western: Amundi, Man Group and HSBC Asset Management.
A climate-focused resolution filed last year with Mitsubishi UFJ Financial received 23% support overall. Almost a third of institutional investors, or 20 of 69, supported the resolution. However, when it was narrowed to Japanese investors, the proportion was less than a quarter: six out of 28 voted in favour, according to Kikonet, one of the nonprofit groups involved in the filing.
Asian countries have started paying attention to ESG just as the issue of climate change — which is more time-sensitive and more aligned with financial risk — is dominant.