Asian companies are catching up on sustainable practices, says Singapore Exchange

The chief executive of the SGX, Loh Boon Chye, said 2020 was an inflection point as Asian firms gained greater awareness of sustainability issues.

Asian companies are catching up on sustainable practices, says Singapore Exchange

SINGAPORE — Companies in Asia are catching up with their Western peers in adopting sustainability and ethical practices, said Loh Boon Chye, chief executive of the Singapore Exchange.

Environment, social and governance — or ESG for short — refers to a set of criteria used to measure a company's performance in a range of areas such as carbon emissions, contributions to society and boardroom diversity.

Those criteria are increasingly used by investors globally — alongside traditional financial metrics — to evaluate potential investments.

Europe and the U.S. have been leading the adoption of ESG, but Loh told CNBC's Sri Jegarajah that it's only a matter of time that more businesses in Asia jump on the bandwagon.

"I think 2020 has been an inflection point," the CEO said on Monday.

"While we may say that Asia lags behind the Western hemisphere, I would say there's been a greater awareness of ESG and indeed more companies are adopting sustainability and ESG practices," said Loh, who's a member of CNBC's ESG Council.

The Covid-19 pandemic has highlighted how catastrophic events would impact investment returns.

Companies with strong ESG practices outperformed during the pandemic, and that led more investors to prioritize investing in such firms.  

In Asia-Pacific, 79% of investors increased ESG investments "significantly" or "moderately" in response to the pandemic — slightly higher than the global share of 77%, according to an MSCI survey of institutional investors.  

Loh said the SGX is working to launch stock indexes that comply with ESG principles, as well as encourage the listings of green and sustainable bonds.

— CNBC's Sumathi Bala contributed to this report.