Asian institutional investors are showing interest in partnering with other asset owners and asset managers as they seek to meet their climate goals but are hindered by the lack of investment avenues and technical expertise. These are some of the findings from Cerulli Associates’ newly released report,  Environmental, Social, and Governance Investing in Asia 2022: Marching Ahead Toward Sustainability Goals.

According to the research, 62% of asset owners in Asia Pacific ex-Japan indicate interest in partnering with each other for knowledge sharing and creating tools and analytics, and 57% showed interest in collaborating for climate-related investment opportunities. Asset owners are also keen to explore partnerships with asset managers in similar areas, namely, knowledge sharing, tools, and analytics.

In fact, climate has emerged as a key impact investing theme due to regulatory and government initiatives, while other social issues—quality education, gender equality, reduced inequality, and no poverty—feature lower among priorities. Three-fifths of research participants are interested in investing in climate change as well as clean technology and renewable energy.

However, investors are pursuing a cautious investing approach due to hesitancy in exploring the new asset class, lack of understanding about addressing climate risk, uncertainty about the actual use of proceeds raised, and lack of investible projects. The research finds that 74% of asset owners currently have a maximum of 5% of their assets in green bonds; the percentage is similar for social and sustainability bonds, at 68%. Half have plans to increase their allocation to these bonds over the next two years. 

"Investors in the region lack the know-how and technical expertise required in measuring the carbon footprints of their investment portfolios, in subjecting their portfolios to different climate conditions for risk assessment, or in evaluating the scope of emissions to be included in measuring the carbon footprints of their portfolios. Hence, they are keen to not only gain more understanding of these technical areas, but also build their capabilities,” said Leena Dagade, an associate director at Cerulli.

Cerulli believes that major influential investors in the region should consider collaborating to address various issues and accelerate investments into climate-transition and green financing investments to meet their net zero pledges. Cerulli also believes that major institutional investors and asset managers should consider disclosing the extent of their assets that adhere to ESG principles and setting targets for ESG-integrated investments to reach a certain percentage of their portfolios. This will ensure that more efforts are taken to improve the share of ESG assets in investment portfolios.