Accelerating ESG investing

With climate concerns heating up, here are three ways investors can get better at investing responsibly.

At the 2021 United Nations Climate Change Conference (COP26), it was acknowledged that much remains to be done to reduce carbon emissions. Here are three ways investors can make a positive impact.

1. Actively engage companies in their transition away from coal

In Asia and Emerging Markets (EMs), coal and fossil fuel continue to be key energy sources. These countries require substantial resources to move away from coal which includes having to build new green infrastructure and reskilling people. By investing and actively engaging with companies that genuinely want to reduce their carbon footprint, investors can play an important role in this transition.

2. Seek out sustainable investing opportunities

Asian economies are finding their own ways to reduce their carbon footprint, which will result in new investment opportunities. For instance, South Korea aims to increase its consumption of hydrogen, which is a more sustainable alternative to coal and fossil fuel. This creates opportunities in Korean automakers and shipbuilders. Across Asia, we see opportunities in electric vehicle (EV) manufacturers and the EV supply chain. We also expect more issuances of renewable energy and green bonds going forward.

3. Make use of quantitative tools

As more ESG data becomes available, quant tools can make more efficient use of these large volumes of complex data. Quant tools can build carbon-friendly portfolios that are not overly concentrated in specific countries, sectors or stocks. Quant tools can also help investors better understand how a carbon-friendly portfolio impacts returns and volatility.

Besides a greater emphasis on ESG, what can you expect from 2022? Explore the other themes in our 2022 Market Outlook to find out.

ARTICLE ASIA CARBON EMERGING MARKETS ESG LIGHTER READS MULTI ASSET QUANT SUSTAINABLE BONDS TRANSITION
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