Catering to the retirement income needs of rapidly growing and ageing populations in the region, pension funds in Asia are expected to witness "unprecedented" growth
in the coming years, the Asian Development Bank (ADB) said.
The ADB in a latest study has said that development of successful pension funds also hold the key to long-term economic growth in Asia.
"Pension funds in Asia are set to post unprecedented growth in (the) coming years as they seek to meet the retirement income needs of rapidly growing and ageing
populations," the study commissioned by the multilateral lender said.
The report 'The Time to Lead is Now: The Adoption of ESG Analysis by Asian Government Pension Funds' has been prepared by Hong Kong-based Association for
Sustainable and Responsible Investment in Asia (ASrIA).
Going by estimates, people aged 65 years and above in Asia would more than double between 1995 and 2050.
The ADB noted that responsible investing involves active engagement by investors with companies to encourage the adoption of higher environmental, social and
governance standards.
"A re-balancing of the global economy depends on Asians consuming more than they do currently. That will only occur if they are confident that pensions will provide
for them in their old age.
"Pensions that generate sustainable long-term returns will help cover these needs and will promote increased consumption," Philip Erquiaga, who is the Director General
of ADB's Private Sector Operations Department, said.
According to the study, since most Asian pension fund assets are invested largely in domestic government or corporate bonds, they would be able to incorporate
environmental, social and corporate governance (ESG) standards into their equity investment processes more easily than their global peers.
Moreover, the report noted that by prioritising sustainable and long-term investment, pension funds can also influence strategic decision making in Asia.
"Asian pension funds will increasingly be able to spur the use of ESG best practices through their investment policies... They should also actively use their voting rights
at shareholder meetings to ensure investee companies behave responsibly," Wai-Shin Chan, who is the Executive Director of ASrIA, said.
