Like many of their peers in other markets, Asia-Pacific IR professionals are moving from viewing ESG reporting as a compliance task to it being a business driver. And they are bringing the investment community with them on this journey.
Vikash Jalan, head of strategic planning and investor relations for chemical company Indorama, says ESG and its close cousin sustainability reporting are hot topics, but there are degrees of sophistication and relevance when it comes to investor understanding of this topic around the world.
‘Our western investors have signed agreements like the Net Zero Asset Management initiative,’ Jalan says. ‘For Asian investors, there is often more focus on creating absolute returns than on ESG so there is a gap in the market and companies have to deliver on all fronts because they need to attract all sorts of investors.’
Indorama has taken a front-footed approach to ESG, setting net-zero targets for 2030 and 2050 and giving ESG board representation. ‘I recommend this to all corporates because ESG is likely to be part of a company’s license to operate and corporates will have to adopt ESG practices to attract investors,’ says Jalan. ‘But it’s a journey and we’re on a path from ESG being a compliance factor to it being a business driver.’
He notes that while there are costs involved in adopting ESG reporting practices, the payback is a lower cost of capital. ‘There’s disruption going on,’ he explains. ‘It’s slow because of Covid and the energy crisis but this is the way forward.’
Differing demands of disclosure
Angelica Castillo, investor relations manager for Shell in the Philippines (Pilipinas Shell), is also very focused on ESG reporting. She notes that some investors would not even consider investing in companies that do not involve ESG in their strategy.
‘The Asian landscape is maturing and regulators believe companies should be ready to take this on,’ she says. ‘In the Philippines, the SEC mandated all public limited companies to report their sustainability information annually, starting this year.’
Pilipinas Shell has reported sustainability information since 2017; interest from investors and analysts in its ESG plans and activities has increased in recent years.
Affryll Teo, head of IR, sustainability and M&A for Malaysian insurance firm Tune Protect Group, says ESG reporting is still more of a compliance function for small and mid-cap companies in that market, rather than a business driver. ‘The blue chips are ahead of the curve,’ he says. ‘This is understandable, given their regional and global business footprints and the rigor of the disclosure standards with which they need to comply.’
Local regulator Bursa Malaysia has gradually raised ESG disclosure standards. At the moment, companies with a financial year ending on or after December 2023 must disclose a range of sustainability matters. By December 31, 2025, listed companies will need to make ESG disclosures according to the requirements of TCFD.
Post-Covid greenwashing and technology
As in every market, greenwashing is a problem across Asia-Pacific listed businesses. Greenwashing involves companies publishing information about their environmental and social record that is without substance.
Malaysia attempts to deal with this by requiring companies to provide assurance about whether their sustainability statement has been reviewed by internal auditors or a third-party assurance provider. It’s expected mandatory assurance for sustainability reporting will be introduced in the future.
The Covid-19 pandemic transformed the use of technology in IR across Asia-Pacific and changed some aspects of the practice for good. For instance, some analysts now prefer to meet online rather than in person. ‘This is due to convenience, time saving and cost,’ Teo says. ‘In 2022, we participated in three investor webinars and one corporate access event, all of which were virtual. We have held our annual general meeting virtually since 2020, which will continue in 2023.’
Tune Protect’s tech-themed corporate day in November was a hybrid event and the audience could choose to be physically present or watch it live. A clip of the event was uploaded to its YouTube channel so those who missed it could watch later at their convenience.
The business broadcast the group CEO’s presentation for its fourth quarter 2022 earnings call for the first time live on its YouTube channel. Tune Protect is understood to be one of only a handful of companies in Malaysia to use the popular video platform for corporate purposes. This approach allowed it to considerably broaden its audience.
‘In the past, participation in such calls was limited to institutional shareholders, analysts and fund managers,’ Teo says. ‘We have used YouTube to encourage different types of investors to participate and to promote greater transparency.’
ChatGPT and ESG reporting
Teo is circumspect about the efficacy of new tech, such as artificial intelligence-powered language processor ChatGPT, for IR. ‘It could automate drafting earnings calls scripts but it wouldn’t be appropriate to input market-sensitive data like quarterly financial results into ChatGPT before releasing it to the market,’ he explains. ‘When it comes to any technology, it would be wise to tread carefully, given our industry operates within a regulated environment.’
Castillo says technology assists with ESG reporting – for instance, it makes tracking disclosures such as greenhouse gas emissions and carbon intensity more accurate and manageable. ‘It allows us to connect with investors, showcasing our progress against our strategy, which fully embeds ESG principles,’ she explains.
Jalan says technology has made it much easier to connect with stakeholders through avenues such as social media and direct messaging. It also allows him to reach a broader pool of investors, without necessarily having to travel to them, which further supports ESG goals, thanks to less airline travel.
Looking ahead, Castillo says it is critical to continuously collaborate with regulators and sustainability-oriented independent standards organizations when it comes to emerging market issues.
Jalan, meanwhile, says managing ongoing market volatility is likely to continue to occupy much of his time. ‘The challenge for everybody is to be consistent and reach out with the right narrative to as many people as possible to differentiate the business,’ he says. ‘It’s easier said than done.’
