Over recent times, many investors, both large institutions and small family offices, here in the SEA markets have focused not only generating high returns, but also using the ubiquitous ESG criteria for their investment guidelines. If 2020 and 2021 can be considered banner years for sustainability investing, then 2022 is shaping up to be a year of the backlash against the ESG trend. Has ESG’s growing “green” movement suddenly wilted to a brown hue of late?
Why may one ask since ESG seems to have been adopted globally for properly-accepted, responsible investing in modern times? A recent Moody’s report (May 2022) forecasts that green, social, sustainability and sustainability-linked (GSSS) bond issuance will be flat in 2022. This can be largely attributed to the recent “green-washing” scandals and market headwinds of high inflation and interest rate hikes that has put ESG investing in the backburner of priorities of late.
Furthermore, to add more damper to the ESG movement, the US Securities and Exchange Commission (SEC) fined a BNY Mellon unit US $1.5 million ($2 million) for misstatements and omissions about its environment, social and governance considerations this past May also. These types of ESG standards manipulations will only weaken the fortitude of well-intentioned investors, especially among smaller family offices in Singapore, Hong Kong, and Taipei, who are already nervous about the increasingly volatile markets.
“There’s a lot of pressure on investment managers to demonstrate the value that they’re getting out of their stewardship work,” said Peter Reali, managing director of responsible investment and engagement at Nuveen LLC, which oversees about $1.3 trillion. And when it comes to wider industry efforts to cut portfolio emissions, ESG investment professionals “definitely hear the complaints and concerns,” he said.
Many investors around the globe are demanding more evidence that ESG asset managers can truly deliver on their returns, with a growing chorus, including the likes of Elon Musk, that complain the industry is not on the right track.
Time will only tell if the ESG movement is truly here for long term as originally touted, but history has also proven that competing priorities of the greenback versus the green movement in ESG can not easily be determined among investors, especially within the ultimate verdicts from institutional investors and family offices in SEA.