As climate change and sustainability taken up the investor agenda, capital is flowing into environmental, social and governance (ESG) funds. About US$2.7 trillion of assets are now managed in more than 2,900 ESG funds, according to Morningstar. The stock markets and investors have proven this by the fact that $649 billion was invested in ESG-focused funds globally through the end of November 2021, already up from the $542 billion invested in 2020 and $285 billion in 2019 based on the latest Refinitiv Lipper data. Meanwhile, Asia and Southeast Asia have also aggressively jumped on the ESG bandwagon in these past few years. Morningstar reported that capital flows into ESG funds continue to increase with total assets invested in Asia-domiciled funds at US$36.3 billion at the end of June 2021.
In 2021, the Philippines took a leap forward in this regional trend when its Securities and Exchange Commission chief made the major announcement that sustainability reports would become mandatory in 2023. Also in the same year, Philippine issuers raised the equivalent of US$103m from ESG peso bonds and US$553m from offshore ESG US dollar bonds, according to Refinitiv data. IFR data showed that BDO Unibank printed Ps52.7bn (US$1.02bn) two-year sustainability bonds at 2.9% on early 2022, which was the Philippines’ largest domestic bond offering by a financial institution or corporate. Further report from IFR, the sovereign’s green bond would be issued under a sustainable finance framework to support the country’s target of reducing greenhouse gas emissions by 75% by 2030 from the 2020 level. This is a clear indication that ESG is becoming a governing principle to demonstrate future-readiness, attract new investors as well as build brand equity among consumers. This is a fantastic opportunity for companies in the Philippines to be ESG leaders in the Asia Pacific region.