Sustainability’s New Frontier: Asia

  • 2016-04-05
  • The Wall Street Journal

Sustainable investing once seemed like a laughing matter to some executives in Asia.

Literally, says Billy Hwan, a portfolio manager for Parnassus Asia Fund (PAFSX), which has $10 million in assets. He says many Asian company managers used to laugh in his face when he would ask about sustainable business practices.

But just a few years later, he says, many of those same managers have shifted away from a growth-at-any-price mind-set.

“Most of the companies I talk to now understand that to attract investor capital and to grow over the long term, they need to consider the overall sustainability of their business practices,” says Mr. Hwan.

Some of these Asian companies see competitors in Europe and North America managing risk and satisfying customers by incorporating environmental, social and governance (ESG) factors into their business models.

Europe’s buildup

In Europe, discussions of sustainable investing have been building for a couple of decades. Zoe Knight, a managing director at HSBC who leads the bank’s Climate Change Center of Excellence, says European considerations of ESG started more than 20 years ago with a push from charities, foundations and universities, followed by public retirement systems that began to look closely at issues like corporate carbon footprints.

Now, the discussion of sustainable investing in Europe is moving beyond equity investments, she says, and into fixed income, with growing interest in so-called green bonds, which are used by municipalities and private-sector borrowers to fund environmentally friendly real-estate development and other projects.