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ESG investing
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Explainer | What is ESG and why does it matter for businesses and investors?

  • Europe-domiciled funds accounted for 81 per cent of all assets scored for ESG performance last year
  • Asia excluding Japan reported the launch of 43 sustainable funds last year, up from 27 in 2019

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Bourse operator Hong Kong Exchanges and Clearing defines ESG as matters related to a listed company’s sustainability, its impact on the environment and the wider society within which it operates. Photo: Bloomberg
Eric Ng

The recognition of the benefits of environmental, social and corporate governance (ESG) disclosures -to companies and their investors – has led to the adoption of some forms of ESG reporting requirements by stock exchanges in most developed markets in recent years.

Fund managers are increasingly taking ESG factors into account along with financial disclosures. Listed companies are typically scored on their performance while managing risks and taking advantage of opportunities arising from a rising global demand for better ESG track records.

About 71 sustainable funds that incorporate ESG factors were launched last year in the United States, much higher than the previous record of 44 in 2017, according to funds researcher and manager Morningstar. Another 25 existing funds changed their investment strategies to become sustainable funds.

Europe-domiciled funds accounted for 81 per cent of all assets scored for ESG performance last year and reported the launch of 505 sustainable funds, an increase of 25 per cent over 2019. Asia excluding Japan reported the launch of 43 sustainable funds last year, up from 27 in 2019.

Here is what you should know about ESG disclosures.

What is ESG?

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