
Specialist in Asia Pacific, Japan, China, India and South East Asia and Global Emerging Market equities.
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Specialists in equity portfolios in Asia Pacific, emerging markets, global and sustainable investment strategies
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Our philosophy is very simple. We are constantly searching for high quality businesses and when we acquire them, we will work relentlessly with them to create long-term sustainable value through innovation, ESG-led and proactive asset management.
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Asian Fixed Income
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- Asian Fixed Income - Responsible investment
Approach to Responsible investment
Stewardship and ESG integration
Our approach to investing is driven by a commitment to providing the best possible outcomes over the long term for our clients. By ensuring that portfolios are built in a balanced and diversified manner – where one particular view does not dominate – we increase the likelihood of accomplishing portfolio and client objectives.
Our analysis of countries focuses on six factors, which, in our experience, have the ability to explain changes in country spreads. These are: politics, structural reform, fiscal policy, monetary policy, the external sector and technicals. Three of these factors are intimately related to responsible investment and stewardship: fiscal policy, politics, and structural reform.
ESG issues also have a significant bearing on risk for corporate issuers. As a result, they are incorporated into the Credit Research process that supports our entire Fixed Income business globally.
Because ESG risk assessments are incorporated into the idea generation stage of our portfolio construction processes, all clients benefit from our consideration of these factors. Product design is carried out independently from idea generation and clients therefore have the option to further shape their portfolios using ESG factors, if desired. These options include negative or positive ESG screens. We can work with clients to incorporate other ESG ideas into their product designs, based on their individual views and requirements.
Integration
For sovereigns, ESG considerations are embedded in the Key Factor Model, alongside macroeconomic data, political developments, policy-making assessment (fiscal and monetary) and market technical aspects. As such, they are sources of risk and drivers of return that we take into account when conducting our research efforts.
For corporates, ESG risk factors are an important consideration in the assignment of credit ratings on individual issuers. This process is described in more detail in the Fixed Income Overview page which describes the Credit Research process that supports our entire Fixed Income business globally.
Assessment and monitoring
ESG issues are identified and considered in the course of our everyday analysis of securities. In order to support our monitoring and assessment efforts we have compiled a database with a number of relevant indices for ESG. The database gives us an overview of how countries compare with each other and how they track over time. This information helps us monitor the countries in which we invest in a systematic fashion and also contributes in our assessment of ESG considerations.
Six variables are monitored for every country in which we invest: human development, corruption, business environment, institutional strength, government effectiveness and energy dependence. We utilise indices provided by reputable sources including the World Bank, the United Nations Development Program, Transparency International, the Fund for Peace and the World Energy Council. For these indices we analyse levels, rankings and trends over time, providing us with objective measures to support our research.
ESG trends, concerns and controversies are also logged and stored within our Investment Opinion Network. This proprietary system is utilised by the entire Fixed Income team globally, enabling all investment professionals to be aware of issues affecting individual issuers and industry sectors more broadly.
Engagement
Ongoing engagement with both sovereign and corporate issuers forms a critical part of our research process. We seek to influence issuers in which we invest and use meetings as an opportunity to reassess ESG risks. As well as attending investor days and roadshows, we proactively try and meet key decision-makers where possible. These sessions typically present opportunities to engage and to raise pertinent ESG-related issues that we deem relevant and important. In the overwhelming majority of cases, issuers are receptive and constructive engagements continue to take place.
In order to develop our own understanding, as well as to contribute to improvements in industry practice, we have been involved in the United Nations Environmental Program Finance Initiatives E-RISC project phase 2. One of the goals of this project is to develop methods for investors to better incorporate environmental factors into the risk assessment of sovereign issuers.



Case studies
We believe that a strong commitment to stewardship is an essential component of a strong approach to responsible investment (RI), and that embedding RI into the core of our investment activities is in the best long-term interests of our clients. For more than a decade we have systematically and progressively improved our practices and processes across our investment capabilities globally.
Climate change
The section below provides additional, team specific, information on climate change. Further information on our approach to climate change can be found in our climate change statement.
Team climate change statement
Key climate-related risks in our team’s portfolio
We believe in the science of climate change and that a transition to a low carbon economy is underway. Issuers’ responses in tackling climate change will likely have a substantial impact on their credit profiles, and in turn, their probability of default. Both physical risks (financial risk rising from extreme weather patterns, natural disasters, supply chain disruptions, employee safety and disruptions to operations) and transition risks (financial risk rising from changing strategies, policies or market behaviours as society and industry transitions to a low carbon economy) are likely to be disruptive for issuers, where cost of physical risks could outweigh the benefits in the short term for most issuers. Nonetheless, costs related to transition risk would also escalate over time as the highly fossil fuel powered Asian region navigates decarbonisation.
Limited action against climate change will intensify the frequency and severity of extreme weather conditions, impacting issuers’ assets, supply chains and employee safety. In particular, property and casualty insurers would be the most vulnerable as they face higher insurance underwriting risks, while utility issuers would also be at risk with higher natural hazards posing significant risks to their access to natural resources, as well as supply chain and logistics.
Transition risk is also meaningful to our Asian credit strategies as the region continues to ramp up efforts towards regulating climate-related risks. Industrial and utility issuers will be challenged with business and regulatory risks as they endeavor to achieve an orderly transition from coal to more costly natural gas and renewables, while financial issuers are likely to face higher carbon prices and regulatory costs over the long term. Sovereign and government-related issuers, especially those operating in more energy-intensive and fossil-fuel-dependent economies, are more likely to be impacted in their transition to a lower carbon economy.
As the window to decarbonise and limit global warming is closing fast, we expect the impact of climate-related risks on the Asian credit market to be dynamic and related regulation to evolve rapidly. Hence, it is critical for us to continue to assess and monitor the resiliency and ability of issuers to adapt to climate change and stricter climate policies. Issuers who do not make the transition in an orderly manner will be at risk of being left behind with higher reputational, regulatory and business risks, with their assets potentially devalued or written-off before the end of their expected economic life.
How we identify these risks
Climate-related risks are identified and assessed by credit analysts, who are sector specialists with wide-ranging experience and a deep understanding of respective markets and sectors, supported by a dedicated Responsible Investment team. We assess the impact from the relevant sector or issuers’ operations and products on the environment, including but not limited to issues of waste/emission management, resource use, energy intensity and sustainability.
Climate-related risks are assessed as part of our detailed Environmental Social and Governance (ESG) Risk assessment. Our credit analysts rely on a combination of company engagement, sustainability reports and third party ESG research and data providers to arrive at their ESG risk assessment.
Credit analysts also assess the net zero alignment of individual issuers, utilising the framework developed by the IIGCC (The Institutional Investors Group on Climate Change). The framework allows a detailed analysis of issuers’ commitment towards decarbonisation including short- and long-term carbon emissions targets based on a Science-Based approach (in line with meeting the 1.5 degree goal of the Paris Agreement), as well as specific energy and revenue mix, and capital expenditure for its pathway towards net zero. Furthermore, we also conduct scenario analysis on individual issuers’ implied temperature rise based on committed forward-looking decarbonisation targets, as well as the actual recent carbon emission performance.
Moreover, our access to third party carbon data allows an analysis of carbon intensity at both individual issuer and the portfolio level, which enables a quick comparison of carbon intensity between different sectors, portfolios and benchmarks.
How we address these risks
Our views on issuers’ climate-related risks are incorporated into a separate ESG risk rating, which is one of key rating drivers for the independent Internal Credit Rating (ICR). With the ICR being a core aspect of portfolio construction, our assessment of climate-related risks naturally flows through the entire portfolio construction and credit selection processes.
In addition to issuers’ individual ESG risk rating, analysts are also required to indicate whether ESG Risk is on an ‘improving’, ‘steady’ or ‘deteriorating’ trajectory. An issuer that is not demonstrating improvement or showing limited willingness to commit or align itself towards decarbonisation goals would be assigned a higher ESG risk rating or a negative ESG risk trajectory, which could result in a lower Internal Credit Rating (ICR). A five point scale, ranging from ‘very low’ to ‘very high’ ESG risk, is utilised for the ESG risk rating, and this rating gets incorporated into an issuers’ overall Internal Credit Rating (ICR) and reviewed at least annually. This dynamic credit process enables us to form an independent view from the external ratings, and seek an adequate risk premium for higher climate-related risks.
Issuers with poor ESG risk ratings could end up being excluded from our portfolios. Where analysts are unable to form an adequate assessment of the company due to the high uncertainty and lack of transparency of their ESG assessment, the company is deemed ‘uninvestable’. This ‘uninvestable’ list of issuers is reviewed annually and portfolio managers are notified as and when there are changes to the list.
Furthermore, our Stranded Asset Framework also allows us to identify issuers with high risk of asset stranding due to global action on climate change, changing economics, new government regulations, evolving social norms and the impact of new technologies. A traffic light system is used to highlight issuers with higher risk of its assets being stranded before the end of their expected economic life, especially when they have very long-dated bonds outstanding.
Key climate-related risk performance indicators such as greenhouse gas scope 1 and 2 emissions (emissions from direct operations and from the use of electricity, respectively), or disclosures on coal usage as they are increasingly made available by issuers, are periodically monitored. We also track overall portfolios’ progress including the net zero alignment as well as the carbon intensity.
Against a fledgling Asian investment landscape that is starting to embark on addressing climate-related risks, our credit analysts also monitor issuers within the investment universe for climate awareness and initiatives. This process is undertaken as part of the overall effort to identify all material ESG risks faced by an issuer, where credit analysts monitor individual issuers’ pathway to net zero as well as Scope 1 and 2 emissions.
Key challenges remain with Asian issuers’ relatively weak disclosure standards and a lack of standard taxonomy. For example, government and agency issuers, often have insufficient disclosures on climate change initiatives, although since 2020 many have started to propose mandatory or voluntary disclosure standards. Developments in China are of particular interest due to its prominence in Asian Fixed Income Indices, and the recent voluntary disclosure standards recommended by the China Enterprise Reform and Development Society (CERD) (in 2022) has been encouraging for progress. Through engagements with issuers over time, the team believes that the climate change awareness within the investment universe will continue to grow and mature, and this will in turn help us manage climate risks better.
The targets and objectives we have set
As we progress with incorporating climate change awareness and standards in the Asian region, we have top-down portfolio level targets for our Asian Credit strategies, excluding sovereign, quasi-sovereigns and agency bonds. Our quantitative targets are based on thresholds of the portfolios aligned to net zero. These targets focus on the proportion of the portfolios that are committed, aligning or aligned to net zero by 2050. The criteria for defining each status is based on the framework developed by the Paris Alignment Investment Initiative Net Zero Investment Framework Implementation Guide.
Short term (2025) | Medium term (2030) | Long term (2040) |
Portfolio level
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We aim to outperform benchmark in ESG metrics, and one way to achieve this is by gradually reducing exposure to investments in high-emitting assets and increasing exposure to low carbon assets. With the ultimate aim to achieve net zero in our Asian Credit Strategies by 2050, our targets take a phased approach, reflecting the challenges resulting from a lack of disclosure and limited net zero targets set by Asian issuers.
Based on the current state of climate governance and disclosure standards as well as accountability in Asia, if the existing standards and lack of disclosures remain as-is for the years to come, there will remain a significant number of issuers, such as sovereign and quasi-sovereigns, for which we will be unable to conduct an in-depth quantitative ESG assessment from a climate assessment perspective. For such names, we will continue to rely predominantly on a top-down qualitative assessment of the issuer from the closest perspective we can achieve (e.g.: at the sovereign or agency level). As fixed income investors, we cannot vote, but we will strive to influence issuers through dialogue during the course of due diligences, roadshows and through other channels that are available to investors. With time, the goal is to have our Asian Credit Strategies achieve consistently better emissions disclosure with net zero alignment plans compared to their respective benchmarks and overall investment universe.
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Responsible investment
For over a decade, responsible investment has been integrated into every investment process.
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