On February 9, 2017 Peter Sartori, Head of Equity, Asia, and Peter Monson, Senior Equity Analyst, Nikko Asset Management, published on IT Business Net a paper entitled, “Why ESG for Emerging Asia?”
“This paper reflects on recent industry research into ESG and Nikko AM’s own experience in applying ESG analysis – particularly Asian EM stocks, as well as what we see as key lessons learned.
- Using Environmental, Social and Governance (ESG) factors in the search for alpha is complex, particularly in Emerging Markets.
- Investors will often have their own standards for what constitutes acceptable ESG criteria.
- The contribution of ESG to investment performance is often difficult to establish, especially a priori.
- In Emerging Markets (EM), many stocks are off benchmark and therefore not captured by independent ESG data providers, which can lead to mispricing.
- However, there is consistent evidence that in Emerging Markets, good Governance is a key indicator of value. Similarly, Environment and Social factors are important red flags as part of buy and sell disciplines.
- Hence, we believe that there is a strong case for ESG criteria – in particular Governance – to be an integral part of a fundamental research process for stocks in EM, and Nikko AM’s Asia Equity team has been incorporating this criteria into its analysis since inception over ten years ago.”
You may read the paper on the IT News internet site
You can read the full paper and charts on the articles page of the Nikko Asset Management internet site.