How can investors achieve their ESG goals through exposure to Asian equities?
For investors interested in sustainability themes, such as reducing carbon emissions, reducing poverty, providing access to affordable healthcare and housing, and creating greater financial inclusion in developing world, Asia remains a very important investment destination, in our view. To address these themes globally, we believe we need to include the world’s most populous economies, many of which are in Asia.
The region is making great strides towards clean energy innovation, supported by positive regulatory trends. Government support and consumer demand have made China a world leader in areas such as renewable energy, electric vehicles and sustainable transport infrastructure, including high-speed rail networks, for example.
Among the critical social issues facing communities in Asia, inclusion is a priority area. Social progress requires bringing more people into the global middle class, while ensuring better access to health care, more women in the workforce, and more opportunities for people to advance through education and training.
As a starting point, living a middle-class life requires being part of the “formal” financial system, but millions of people across Asia lack basic banking services. Credit, even in small amounts, can make a huge difference for families living in poverty.
As Asia seeks to add an additional 2 billion people to its middle class by 2030, financial inclusion will be a key enabler of this transformation by creating and sustaining livelihoods. Profitable businesses that meet this need offer microloans, micropayments and insurance.
Which themes offer the greatest potential for outperformance as well as diversification?
In our experience, emerging and frontier market small and mid caps are often overlooked when it comes to ESG portfolios, both for their performance and their diversification benefits. Their ESG qualities are generally less valued and data coverage is often insufficient, and this is where proprietary research can help identify companies that serve as catalysts for a more sustainable world. We spend considerable time cultivating our deep local knowledge on some of the most important ESG issues that matter in the market context.
When it comes to investment themes, we believe companies that are leading the transition to cleaner energy and those that attract more global middle class people still have a long streak of growth. Electric and hybrid vehicles offer opportunities to reduce the environmental impact of vehicles. We see opportunities throughout the supply chain.
Financial inclusion is a key theme that offers opportunities: across Asia, providing access to credit at appropriate rates to low-income segments of society enables greater participation of these consumers in local and regional economies. Opportunities can be found not only in micro and small business finance companies, but also in commercial banks. Access to affordable healthcare is also another very important area that offers potential for outperformance as key parts of North Asia continue to age. Innovative treatments in the fields of cancer, neurological diseases and in the field of medical devices offer attractive long-term growth opportunities.
How is the set of ESG-related opportunities likely to evolve in 2022 and beyond?
As we look to 2022 and beyond, Asia will continue to remain at the forefront of issues such as climate change, social and financial inclusion, poverty eradication and access to affordable health care and housing. It is important to find quality, sustainable growth companies that address these areas; fortunately, the set of opportunities for these companies continues to expand. Markets are changing and growing rapidly, as new consumer preferences and emerging technologies increase the attractiveness of the ESG investment opportunity in Asia.
the Asia Fund Selector Thailand Investment Forum was held virtually on March 24, 2022 and was sponsored by Columbia Threadneedle Investments, Jupiter Asset management, Matthews Asia and TT International.
Learn more about what was discussed and the strategies that were presented here: https://fundselectorasia.com/events/fsa-investment-thailand/