Photo: Bloomberg
Singapore placed second with Hong Kong in the Asian Corporate Governance Association (ACGA) and CLSA Limited’s 10th biennial corporate governance watch report on environmental, social and governance (ESG) performance in the Asia Pacific (APAC) region.
The report was published as separate surveys for the first time, with ACGA’s report delving into ESG performance and practices by market, while CLSA’s report reveals the winners and losers by sector. The latter also examines how corporate ESG practices have evolved over the past two years.
In the report, Australia retained its first place, while Taiwan and Japan came in fourth and fifth respectively.
Singapore, which moved up from third place in 2018, bagged second place for its firm enforcement and improved rules, although the survey found that the country exhibited weaknesses in their public and corporate governance systems that result in lower total scores than expected.
Hong Kong, which tied with Singapore in second place, was also marked down for its weakness in its public and corporate governance systems.
SEE: Deutsche Bank establishes ESG COE in Singapore, says pandemic prompts private-banking clients to turn to ESG
In the sector ranking, Materials & Capital Goods clinched the top spot driven by diversified boards, improving capital structures and a focus on efficiency and emissions.
The sector narrowly beat Technology, a close second, with some major multinationals making “considerable gains”.
“There has been a marked improvement in ESG standards in Asia over the past two years, but corporate governance mechanisms remain fragmented and connections between CG and ESG policies are unclear, limiting meaningful ESG and sustainability efforts by companies, investors and policymakers. These issues need to be addressed in order to provide an effective governance foundation for ESG and sustainability in Asia,” says Jamie Allen, secretary general of ACGA.
“Good governance can drive outperformance. We continue to see a positive correlation between stock returns and governance scores, with companies in the top quintile of ESG scores outperforming those in the bottom by 7.5% over the past five years. Among the ESG pillars, governance has the highest positive correlation to returns, providing strong evidence that it remains the most important area for investors to focus on,” adds Seungjoo Ro, regional head of ESG research at CLSA.
