As sustainable investment is becoming more vital in the capital market, ESG investment strategies are also more diversified. In addition to implementing negative screening principles when building investment portfolios, asset owners can also exercise active ownership by means such as active engagement or proxy voting, to enhance the firm’s ESG performance and potential returns on investment.

Incorporating active engagement into ESG investment strategies is not intended to micromanage firms. It aims to clarify the relationship and expectations between ESG factors and the firms’ development strategy, business model and financial performance to companies and encourage them to act on potential ESG risks and opportunities. Considering a divestment from companies with ESG underperformance may sometimes not be the best investment strategy to bring about substantial change for the environment and society. On the contrary, establishing effective dialogue mechanisms with invested companies on different ESG issues and is the best practice to create long-term value.

The UN Principles for Responsible Investment (PRI), which is internationally influential in ESG investment, encourages investors to adopt six principles of responsible investment, including the exercise of active ownership.¹ The Securities and Futures Commission Principles of Responsible Ownership also emphasises the importance of investors engaging proactively in bilateral dialogue with companies on ESG matters.² Hence, active ownership in global equity strategies has been more common.

In the Asia-Pacific region, not only is ESG a hot topic in the investment industry, but it has also become essential for corporate sustainable development. Alongside the rapid growth of more refined ESG supervision and disclosure systems, many Asian firms have improved their ESG performance considerably in the past few years and achieved outstanding results. This also represents huge potential to create more ESG-related investment opportunities.

In 2021, the AllianzGI team engaged companies from various markets around the world in 299 meetings and covered 484 topics. For instance, the AllianzGI investment team has engaged in a proactive dialogue with a retailer in the Asia-Pacific region to enhance the company’s ESG disclosures in areas such as decarbonisation strategies and potential climate risk responses.

In light of our in-depth ESG research, the AllianzGI team has also expressed concerns to a construction company in the region on potential employee safety issues. The team is pleased that the management responded positively by enhancing safety management objectives and mechanisms to reduce its social risk exposure.

Looking to the future, AllianzGI will continue to pay attention to key issues such as climate change, energy transition, information security, gender representation on corporate boards of directors and corporate governance in the Asia Pacific region, and communicate with investment companies on a regular basis. We believe that active investment strategies can bring positive influences that do not merely create better returns, but also contribute to global sustainable development.

¹ Source: Principles for Responsible Investment - About the PRI
² Source: Securities and Futures Commission - Principles of responsible ownership

There is no guarantee that actively managed investments will outperform the broader market. Environmental, Social and Governance (ESG) strategies consider factors beyond traditional financial information to select securities or eliminate exposure which could result in relative investment performance deviating from other strategies or broad market benchmarks.

Information herein is based on sources we believe to be accurate and reliable as at the date it was made. We reserve the right to revise any information herein at any time without notice. No offer or solicitation to buy or sell securities and no investment advice or recommendation is made herein. In making investment decisions, investors should not rely solely on this material but should seek independent professional advice. However, if you choose not to seek professional advice, you should consider the suitability of the product for yourself. Investment involves risks including the possible loss of principal amount invested and risks associated with investment in emerging and less developed markets. Past performance of the fund manager(s), or any prediction, projection or forecast, is not indicative of future performance. This material has not been reviewed by any regulatory authorities.