Air conditioners in Singapore, drunken Tree Shrews in Malaysia

The best invention ever? The air conditioner. My Singaporean friend smiled as he offered this declaration by a Singaporean statesman on my first visit to Singapore and Malaysia this week. Choon is a good man, works in Pharma in SE Asia, sometime rugby player and U of Michigan Ross School MBA alum. I was invited to Malaysia to cover my EM work for CSR and SRI experts at The International Corporate Social Responsibility Conference 2008 jointly organised by the EUMCCI, OWW Consulting and RUSS Consulting, 29th-31st July in a feature presentation on Responsible Investment in Emerging Markets. The region must be one of Carrier or LG or Dakine’s best sales areas. I expect few expats from cooler northern climates in the financial district’s highrises would last long over their XLS spreadsheets without a steady 72F/19C! But what of the climate impact? I’m still waiting on word of how many units are sold without CFCs, and like any competitive and emerging society, I suppose many may be serviced by solo entrepreneurs in small shops doing the best they can, with or without ISO certifications. The climate impact of the air conditioner business post Montreal Protocol, from manufacturing to consumption patterns, maybe worth a paper from my old mate at UNEP working in the Global Environmental Fund.

Walking the streets of SIA and KL has added colour and texture to my understanding of the SE Asia region beyond three letter airport acronyms. Singapore has always been pitched as the goto for investment in the region, and Malaysia has been interesting for me ever since the massive investments in post-apartheid South Africa in 1994/5. It has the similarities with affirmative action and economic empowerment and the tied destiny in the 1997 Asian flu that whacked the South African rand as traders rushed to quit any EM exposure and the ZAR was so liquid [regularly in the top ten most traded currency]. SE Asia is understandably complex, and research rewards the curious, but one needs the street-skills typical of EM. How to explain the site of a bay of waiting cargo ships, the mixed low and high rise properties, curry for breakfast, white bean hot drink, wakeboard center open until 11pm on Saturday night, and dainty bakery items my mum would be proud of baking [I was reprimanded for taking a photo - since when did baked goods become so competitive?!]?

One needs to be on the ground in SE Asia to properly assess performance, especially for understanding environmental, social and governance [the ESG in sectors report is a good illustration Taking Stock — Adding Sustainability Variables to Asian Sectoral Analysis]. The usual pitches by the hotel and the airport to being green were in evidence. The “onsite” argument view was confirmed in conversation with a respected colleague and expert in the region, a former i-bank analyst heading ASrIA. The data is there, what is and is not being done. But one needs to dig for it [the blunt tools of questionnaire and engagement letter are ignored], and the data or its information is not necessarily well-organized. Covering ESG performance in SA Asia may benefit those with the raw data and local knowledge to analyze it. The information asymmetry benefits locally based players in the ESG space, like Fortis, Aberdeen and Lazard. As a former HSBC guy turned business journalist at Channel 7 explained, sharing a story of how his team, in trying to sort lending exposure post the 1997-meltdown, posted his own people to stake out a factory for a couple of days to see how it was really doing, counting movements of widgets to assess inventory, as opposed to the smiling handshakes of the planned visit which hid the real activity driving the factory cashflows.

The International Corporate Social Responsibility Conference 2008 was hosted at Hilton Kuala Lumpur with its four storey window overlooking twisting highway and lush treescapes a few kilometres from the city center of the Lake Gardens. Day One was CSR focused, Day Two on RI, with Day 3 trying to square the circle with the WBCSD workshop. I was most interested in understanding what was actually being done on the ground by local firms. Geoff Williams at OWW Consulting and other local partners have done good work presenting this conference with CSR and SRI days back-to-back, with the WBCSD workshop tomorrow hopefully putting investors, corporate CSR and company development people in the same room. This is another stop in the project to assess the presentation of the sustainability proposition by companies to investors. I met Geoff when I was leading the PRI in Emerging Markets Project at UNEP FI, where Geoff was a positive in building momentum in the region [expect more on the PRI in EM project in future posts]. Geoff, myself and two academics from the local university covering sustainability, USM, will be moving forward on a mapping survey on RI later this year, building on my work with the similar mapping in SA last year – we’ll be keeping lead author in SA, Neil Eccles at UNISA Centre for Corporate Citizenship, looped. I prefer to work collaboratively. Old PRI colleagues at NZ Super amongst others will be supporting the survey. Universiti Sains Malaysia [USM] is positioning itself as the leading sustainability university in Malaysia (in Asian fashion, it has its own USM song). The survey will cover attitudes to RI in Thailand, Korea, Singapore and Malaysia from asset owners, investment managers and service providers. While not groundbreaking, if we build with the appropriate rigour, it may form the basis for a decent view on the state of play, comparison and contrast to the South African State of Responsible Investment study in 2007, and I will look to replicate it in Latin America and Eastern Europe in 2009.

My connecting WBCSD and OWW was important to increase the EM exposure for the WBCSD Business Theme valuation project by getting to Malaysia, and closing the gap between corporate and investor perspectives. Ten CEOs were expected for the workshop on Thursday, and a representative sample of investors [I will cover the project in more detail in Q4 2008]. The WBCSD project will explicitly cover the perspective of multinational companies, local operations of MNCs, as well as local EM country champions. I look forward to the South Africa event at the JSE in November. As with any of these initiatives that I deal with across the sustainability theme – and there are too many of them – I continue to make the case for real, on-the-ground input and activity from an EM perspective.

In my presentation on Responsible Investment in Emerging Markets, by show of hands, there were just five investment professionals in the hall. Most of the 250 delegates were corporate CSR, NGO, academic or public policy people, except for the likes of Anne-Maree O’Connor from NZ Superannuation Fund, Colin Melvin, CEO of Hermes Asset Management (UK) which manages the £35 billion British Telecom Pension Fund, Kris Douma, Head of Responsible Investment Support & Active Ownership at Netherlands based Mn-Services [we met at the Institutional Investor event in Amsterdam in March], which manages €65 billion and Alexis Krajeski, Governance & Sustainable Investment expert, F&C Investments, (UK) which invests more than £100 billion in Socially Responsible Investments [now moved from Boston to London]. YK Park, project Director at ASrIA, covered the Carbon Disclosure Project [CDP] work – ASrIA acts as regional partner for CDP, for example the 2007 CDP5 report. ASrIA has played a key role in opening doors for investors from outside the region. I was hoping YK would offer more information on how the CDP data is being used by investors and CDP members. Understanding the investor impact – and increased use of CDP data – must be measured for a sense of CDP’s impact, a project I have motivated CDP to move on globally in 2008/9.

To hook my insights on EM and ESG in “Responsible Investment: the experience in emerging markets“, I used a little fact I picked up from the BBC Tuesday night to act as metaphor for my speech, see “Malaysian tree-shrew is heavyweight boozer” BBC 29 July 2008. The connection was to the fact that scientists had only just discovered some rather unique behaviour of the small forest creature, how they measured behaviour, and how tracking it over time gives us metrics on how it thrives, including whther it will still be around in 2012.

A tiny tree-shrew that lives on alcoholic nectar could - pound for pound - drink the average human under the table – Proceedings of the National Academy of Sciences . Malaysia's pen-tailed tree-shrew waits until nightfall to binge on fermented nectar from the bertam palm. Insights into how humans' alcohol tolerance first evolved.

The photo was used to reflect 3 messages on “Responsible Investment: the experience in emerging markets“: context, facts, and metrics. My view is that, to understand where RI is and where it may go through 2012, one must appreciate firstly, the socio-economic context of each country [attitudes toward sustainability and ranking of ESG factors will vary], secondly, facts are important and data is available but may need better discovery with better analysis in that cultural context, and finally, the importance of measuring where RI in EM is going, including understanding the appropriate metrics over time per region or country. The message fits the intersection of sustainability and investment where I work. While outside the geographic coverage [Brazil and UK] of the Natural Value Initiative on biodiversity headed by Annelisa Grigg and my former UNEP FI colleague Susan Steinhagen, I think the shrew fits neatly into the fundamental question: how may investors better quantify the biodiversity value of ecosystems? How much is the scientific discovery of this behaviour worth? How much is each shrew worth?

The audience was typically Malaysian (or so my hosts tell me): in the Q&A session – for the first time ever in my public speaking career - no questions! In a region where culture dictates no losing face and reticence amongst strangers, at least in general session, 250 polite people stared back at me. I smiled. This is what you learn when you fly halfway around the world…