According to MSCI, the Asia-Pacific (APAC) region has improved regarding average ESG stock scores due to pressure from investors and regulators in countries like China and Japan. The MSCI report found that over 80% of the sectors in APAC countries have increased their overall ESG scores in the past three years. The upward trend contrasts the region’s usual exceptionally low ESG ratings.

MSCI, in its APAC index, separates markets into laggers, average, and leaders based on overall ESG scores on companies in these countries. While scores show improvement in all three categories from 2018-2020, the region is still behind on ESG.

The report focused on the energy, materials, and consumer staples sectors, those which present the biggest ESG risks to the region. Miranda Carr, MSCI’s research director: “There are still concerns with the human capital side, which stretches from the consumer staples side through to technology and pharmaceuticals. We are seeing some improvement, but that varies by the market.”

In the region the financial and healthcare sectors, which have fewer ESG issues, saw scores increase.

Regarding countries, India, China, and South Korean pose significant risks to the region’s overall ESG score, as for example, China and India’s energy sectors both have low ESG scores.

In the end, though, Carr find the region’s ESG progress promising because the region’s ESG landscape is changing for the better.