This is the RBC Asian Equity team’s third annual environmental, social and governance (ESG) report.
It has been an extraordinary and unprecedented few years since the advent of the global pandemic. The inability to travel has necessitated changes to the way we work as an investment team, making seamless and fully integrated environmental, social and governance (ESG) analysis an ever more important part of our process.
2022 should provide us with an opportunity to take our efforts one step further. With the SFDR Article 8 and 9 initiatives being undertaken in Europe, it becomes increasingly important to address the requirements of our client base with appropriate product development and transparent ESG disclosures.
As Asian governments increasingly commit to specific targets in the fight against climate change, we are provided with a clearer template on what companies in various countries will have to do to help their governments and economies meet carbon targets. As a team, we are closely tracking our portfolio carbon scores and ESG ratings, using both internal and third party metrics, to ensure we continue to meet our obligations and thresholds. While Asia continues to lag other developed markets in terms of ESG awareness and commitments, both on environmental issues and social responsibilities, we feel that change is being effected and is accelerating.
Falling under the ‘G’ for governance, the consideration of ethical factors also provides a point of risk mitigation within our investment process. We are looking to avoid management teams with the wrong incentive structures that may encourage unscrupulous practices, resulting in abdication from broader responsibilities to their customers or employees. We believe that such companies are on ultimately unsustainable trajectories that will impact their returns to us as shareholders and effect a permanent impairment of our clients’ capital. Active management and due diligence backed with industry expertise can produce the best outcome for our clients, both in terms of capital appreciation and positive ESG outcomes.
For more details on how we integrate ESG into our investment process, our engagement and proxy voting activities, as well as a country level ESG assessment, download the full report.