The asset flow to environmental, social and governance (ESG) funds is driving a proliferation of new products and competition. Asia will power the next stage of ESG uptake, as China is poised to join Japan in accelerating disclosure and engagement. China’s pollution battle will keep the heat on fighting carbon emissions globally, even as the U.S. disengages. Investors will pay greater heed to gender diversity due to reputation risk spurred by a heightened focus on sexual harassment, increased gender leadership and pay-gap disclosure.
ESG indices trail market on the year, adding enthusiasm headwind
Major Environmental, Social and Governance (ESG) indices have generally lagged over the past year, dampening enthusiasm that has helped spur investor interest. Both relative weighting in stock selection and sector allocation, such as being underweight on oil and gas companies, have hurt performance.
