Fools rush in
With the growing popularity of Asian investments, Association for Sustainable and Responsible Investment in Asia executive director Melissa Brown has warned investors to spend time on research before committing their money to a company.
Brown issued this warning in regards to the potential environmental, social and corporate governance (ESG) issues that lie in wait for unprepared investors looking to take advantage of the high growth possibilities in Asia.
“Growth in Asia is not the challenge,” she said.
“The key is how well your systems work when valuation and management is the question.”
According to Brown, investors must be willing to spend extra time researching Asian companies, as many don’t have codes of conduct and the market is comparably different from what most investors are used to.
Echoing the warning, the manager of research and business development at ratings provider RepuTex, Hugh Grossman, said China had been slow to take up a sincere engagement of ESG factors due to a lack of domestic market pressure to do so.
He said this was also hindered by the market’s liquidity combined with the lack of transparency on behalf of individual companies.
However, he added that mainland Chinese companies were beginning to understand the advantages of addressing their ESG risk factors, as well as the importance of providing proper risk management practices.
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