This article first appeared in The Edge Malaysia Weekly on October 28, 2024 - November 3, 2024

Taking a regional and local perspective has contributed to the company’s silver award at The Edge Malaysia ESG Awards 2024 in the best fund based on asset class (fixed income) category, says Lim Suet Ling, CEO of UOB Asset Management.

The winning fund, the United Sustainable Series Global Credit MYR Hedged, is a wholesale feeder fund that focuses on bonds from companies advancing the United Nations Sustainable Development Goals.

“Our approach combines local and ­Asean perspectives, enabling us to navigate the unique intricacies of regional ESG practices effectively,” says Lim.

“We also invested in continuous education on ESG for our team, coupled with active staff participation in corporate social responsibility initiatives. This fosters a greater appreciation of our community and environmental stewardship.”

The biggest challenge in managing the fund last year was identifying value and strategic positioning, and maintaining a high-quality bias in the portfolio.

“Monetary policy and inflation expectations were the dominant forces shaping financial markets in 2024. While government bonds experienced significant volatility, credit markets remained subdued, with spreads staying tight throughout the year. Credit markets seemed to price in a soft landing scenario, leaving little room for error. This became evident in early August when a key economic data release [in the US] triggered a surge in volatility, causing spreads to widen almost immediately,” says Lim.

She adds that investing in subordinated financial bonds issued by high-quality financial institutions is an example of identifying value in such an environment. In addition, present valuations in credit markets suggest a consensus expectation of a US economic soft landing.

She hopes to see ongoing and active stakeholder engagement to make ESG and SRI funds more mainstream and competitive in the country. This includes a concerted effort to ensure that ESG data is consistent and standardised across the board.

“Data is the backbone of all research, and we urge companies to gradually disclose meaningful ESG metrics and initiatives, steering clear of the pitfalls of greenwashing. In the long run, companies demonstrating sound ESG practices should be better positioned in the global supply chain, ultimately creating value and rewarding investors and funds committed to sustainable investment,” she says.

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