For investors interested in environmental, social and governance (ESG) strategies, a regionally diversified approach can help capture global growth. In the coming year, Asia offers a prime opportunity to invest in profitable companies addressing critical ESG challenges through robust and sustainable business models. ESG innovation in Asia is evident across many sectors, including health care and pharmaceuticals, technology, finance and alternative energy. To fully capture the growth and profits of the world’s most innovative ESG companies, it is worth considering Asia. Here, we identify three ESG trends in Asia to watch in 2019.
Battery cells are just a small part of the innovative sectors helping to power a cleaner energy future, including solar and wind power, energy efficiency, high-speed trains and factory automation. Solar panels are another area in which Asia in general, and China in particular, is taking a clean-tech industries leadership role. China makes 70 percent of the world’s solar panels and installs more than half of them.
As Asia looks to add 2 billion more people to its middle class by 2030, financial inclusion will be a key enabler for this transformation by creating and supporting livelihoods. Profitable companies servicing this need provide microlending, micropayments and insurance. In 2017, India had 45 million microborrowers, demonstrating the size and scale of this growing marketplace. (See Figure 2.) Most jobs in emerging Asia are found in micro and small enterprises. Access to capital through financing makes a big difference in the ability of these firms to grow and create more jobs. Therefore, micro and small enterprise lending is an under-appreciated social opportunity. Bangladesh and Indonesia are fast-growing markets for micro and small enterprise lending.
Given the population’s lack of spending power, providing access to affordable health care is a critical social issue. South Asia has millions of people with Hepatitis C, for instance, but few, if any, have been able to afford Gilead Science’s highly effective drug Sovaldi. The drug was priced at US$1,000 per pill in the U.S. and the treatment lasts 12 weeks, adding up to US$84,000. To make this drug available to people across the developing world, Gilead licensed it to several generic drug manufacturers that make the 12-week treatment available for well under US$1,000. With its high quality, globally competitive pharmaceutical and biotech businesses that have low cost structures, Asia has begun to address the problem of affordable access profitably.
 Sources: International Energy Agency analysis based on Electric Vehicle Initiative country submissions, complemented by European Alternative Fuels Observatory; data as of 2016
 Source: The Diplomat. “China’s Solar Power Dominance and Trump’s Trade Tariffs” February 2018
 Source: Brookings, Global Economy and Development Working Paper, February 2017, “The Unprecedented Expansion of the Global Middle Class”
 2016 Global Health Care Outlook: Regional & Country Perspectives, Deloitte, 2016
Previously published on Green Money Journal.
Image credit of Shanghai: Ralf Leineweber/Unsplash