Sustainability work becomes a priority in every stage of the investment cycle, even as work on ESG policies and implementation has slowed in Asia
HONG KONG, Nov. 8, 2023 /PRNewswire-PRWeb/ -- Morrison Foerster, a leading global law firm, today announced the results of its second annual Asia Funds ESG Survey, which shows continued demand from investors for greater accountability when it comes to ESG risk management integration, balanced with efforts by general partners (GPs) to incorporate responsible technology processes and mitigate issues around climate-related reporting and disclosure. The latest Morrison Foerster survey report, Putting the Sustainability Puzzle Pieces in Place, in conjunction with AVCJ, also reveals that Asia funds are incorporating sustainability efforts at a slower pace than last year, while GPs are weaving sustainability into the investment process, with 84% of respondents conducting non-compliance related ESG due diligence on most or all deals they consider.
"My clients definitely understand how incorporating sustainability considerations in their investment and asset management processes can increase a company's valuation and mitigate risk from future regulatory requirements," said Marcia Ellis, global co-chair of Morrison Foerster's global Private Equity Group. "However, as the discourse and debate around sustainability matures globally, it's also clear that ESG policies and their implementation will look different here in Asia due to various regulatory regimes, geopolitical developments, and macroeconomic factors."
"The results of this year's survey show that funds and GPs in Asia continue to see tangible benefits from evaluating risk through the ESG lens," added Susan Mac Cormac, global co-chair of Morrison Foerster's Global ESG Group. "I have worked with companies and funds that have been doing this for well over two decades now. And the reason they remain committed to integrating ESG and sustainability considerations is that the programs we design allow them to see around corners, including preparing for emerging risks like cybersecurity and capturing opportunities like responsible tech."
Survey Highlights
- ESG resources have increased while work on sustainability policies and implementation has slowed—43% of respondents have both an ESG committee and an ESG specialist, up from 8% in last year's report, but 90% of respondents have made no recent changes to their ESG policies or work on implementation of those policies.
- Sustainability is a consideration at each stage of the investment process—84% of respondents conduct non-compliance related ESG due diligence on most or all deals they consider, but only 23% of respondents have pulled out of an investment process after uncovering adverse ESG issues during diligence.
- GPs recognize the potential for sustainability performance to drive value and return—91% of respondents have invested in a company with negative or neutral ESG credentials, expecting to increase its valuation by improving these metrics, and 84% of respondents believe positive ESG metrics will increase the valuation of a target.
- Responsible tech is a key theme for investment and sustainability in 2023—80% of respondents say they have adopted or make it a requirement to adopt responsible tech at portfolio companies, while a full 20% either do not take this action or are unfamiliar with the concept.
- Push for innovation in a competitive global marketplace puts downward pressure on ESG integration—50% of respondents mention that there are competing priorities for tech innovation over responsibility and social considerations at their firm.
- Sustainability work goes well beyond climate-related issues, with many GPs working particularly hard to make progress on diversity, equity, and inclusion (DE&I)—73% of respondents have identified clear and measurable goals on DE&I and 58% have conducted internal training on DE&I for management and staff and/or communicated the importance of DE&I internally and externally.
- Greenwashing risks spur meaningful action across operations, portfolio companies and supply chains— 70% of respondents have policies regarding ESG communications or green claims by portfolio companies, up from 54% a year ago.
- GPs face significant regulatory and operational challenges—53% of respondents cite the need to keep pace with rapidly evolving regulatory regimes as the most significant challenge, but the lack of transparency and reliability of ESG data comes second at 43%.
To download the full report, access a quiz to evaluate where your company is on the ESG journey or listen to the Asia sustainability puzzle podcast series, visit http://www.mofo.com/asia-funds-esg-report.
Methodology
In the second quarter of 2023, on behalf of Morrison Foerster, AVCJ surveyed 100 Asia-headquartered Fund GPs each with assets under management of at least US$1 billion to gain their insights on how sustainability (including economic, environmental, and social sustainability) considerations are impacting their investments and the market. The respondents included private equity funds, credit and special situations funds, sovereign wealth funds, insurance asset managers, and pension funds. By geography, 35% of respondents were based in China/Hong Kong, 25% in Japan, 15% in India, 15% in Southeast Asia and 10% in other Asian jurisdictions, including Taiwan and South Korea. All responses are anonymous, and the results are presented in aggregate.
About Morrison Foerster
Morrison Foerster is a leading global law firm that transforms complexity into advantage for its clients. 2023 marks the 40th anniversary of Morrison Foerster's presence in Asia. In the past five years, our award-winning, Asia-based private equity team has advised on more than 200 PE/M&A deals with over US$310 billion in total asset value. Our Asia team has also been named an Asia Top 15 ESG Law Firm by Asia Legal Business 2023. We are proud to develop pioneering legal innovations related to ESG and sustainability for over 20 years and to offer unmatched industry-leading experience to assist investors and social enterprises that require market rate returns while preserving impact. Our clients include the strongest public and private companies as well as private equity funds, impact investors, and NGOs. We represent organizations as they grow, innovate, disrupt, and develop into leading industry players and household names. Our attorneys are at the vanguard of the ESG evolution as founding members of the Social Accountability Standards Board, and on the boards of Ceres, Business for Social Responsibility and the United Nations Environment Programme Finance Initiative. For more information, visit http://www.mofo.com.
Media Contact
Ming Lacey, Morrison Foerster, 415-960-8828, mlacey@mofo.com
SOURCE Morrison Foerster
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