Despite fast-growing stakeholder interest in ESG, Asian asset managers trail far behind their Western rivals over integrating ESG factors into their operational and investment practices. Fixing this could garner firms significant new revenue, a study says.

Wealth and asset managers could earn $1.8 billion in revenues by 2025 by capturing Asia-Pacific clients’ desire for more ESG-themed investment, a report says. Asia is currently behind other major economic regions in embracing ESG ideas, it said.

The comments come from a 68-page report from KPMG China and Quinlan & Associates.

More investors in APAC, including pension funds, sovereign wealth funds, and high net worth individuals, are increasingly taking ESG considerations into account when selecting their asset managers.

“Given increasing regulatory and investor demands, we believe non-adherence to rapidly evolving ESG standards will leave regional asset managers open to sizeable reputational risks, and create challenges with respect to capital raising, especially from offshore investors,” authors of the study said. 

“Despite the significant potential of ESG investing, most asset managers in the APAC region lag considerably behind their global competitors when it comes to integrating ESG considerations into their operational/investment processes, putting them at risk of losing market share to international managers who are currently operating in the region, it said. Most Asia-Pacific managers can be considered “starters” or “fast followers” of ESG, the report continued.

The report noted how the Monetary Authority of Singapore, Chinese entities such as the People’s Bank of China; Hong Kong’s Securities and Futures Commission, and Japan’s FSA, are all pushing regulations on ESG.

Among the data points is the share price “hit” to a firm that is caught up in “greenwashing” – pretending its conduct is more environmentally sustainable than it really is. (See chart below.)