20 Sep 2023 3 min read

Carrots and sticks: our approach to investment stewardship in Asia ex-Japan

By Trista Chen

Following the recent opening of LGIM's Singapore office, we examine some of the key distinguishing features of the region when it comes to stewardship.


Just one short word – Asia – is commonly used to describe the world’s largest regional economy. So perhaps it should come as no surprise that oversimplification often characterises thinking about the many countries that word encompasses. In reality, even the slightly more specific term ‘Asia ex-Japan’ represents a wide range of major economies in different stages of maturity and with diverging development priorities. 

At LGIM, we see ourselves as a ‘universal owner’ on behalf of our clients, taking a global view in our stewardship role. But we also recognise the need for local variation in our approach to stewardship and engagement in Asia ex-Japan.

Several countries in the region have adopted stewardship codes, drawing inspiration from the UK Stewardship Code. Yet some have taken different trajectories, adapting to their distinctive localised context.1 The diversity within the region demands that we also consider local cultural and social norms in our engagements.

Regional contrasts

Representing 36% of the world’s economy,2 Asia is crucial to LGIM as a global investor. Nearly 60% of the global population lives in Asia,3 and 70% of the region’s energy is currently generated by fossil fuels.4 At the same time, China alone is forecast to install almost 50% of new global renewable power over the five years from 2022.5

Reflecting the variety and contrasts found within the region, we recognise that we need contextualise our Asian investment stewardship activity. But what do we mean by ‘Asian context’? Here are some examples:  

  • Policies are the key driver where national governments have a fundamental role to play in setting the bearing of change. For example, in Asia there are quite different climate policies
  • Major stock exchanges in the region have strengthened their ESG disclosure requirements, but challenges such as data quality, data collection, and the discrepancy between disclosure and actual performance remain significant
  • Although institutional investor ownership has surged in most Asia ex-Japan markets, family- and state-controlled shareholdings continue to represent a significant proportion of ownership in public listed companies, which means the role and ability of institutional investors such as LGIM to influence listed companies in the region is substantially different from those in many other markets
  • LGIM has voted on around 50,000 ballot items annually in the past three years in the Asia ex-Japan6 Despite a year-on-year increase in the number of environmental and social shareholder proposals of more than 25%, the absolute number remains less than 6% for Asia ex-Japan

Carrots and sticks

We believe ‘engagement with consequences’ is the best way to achieve long-term systemic change. Our investment stewardship policies set out our minimum expectations for companies on specific themes and the sanctions that may be applied if companies fail to meet them. One example is our Climate Impact Pledge, where companies may be subject to vote sanctions and/or divestment from certain LGIM funds.

The impact of such sanctions as the ‘stick’ in our engagement tools may be more limited in Asia ex-Japan due to ownership concentration. Therefore, our strategy also includes the ‘carrots’ of identifying a multitude of business opportunities and motivators for companies to drive positive change towards LGIM’s expectations.

We believe our understanding of local contexts when engaging with companies in Asia ex-Japan is pivotal to helping our investee companies appreciate the potential benefits of change, and consequently being motivated to do so.

These benefits might include:

  • Broader access to markets
  • Growing access to capital
  • Reduced or eliminated trade barriers
  • Asset optimisation and avoidance of stranded assets
  • Reduction of operating expenses
  • Increased productivity and ultimately growing reputation
  • Brand value and productive stakeholder engagement
  • Reduction of litigation or regulatory risk

We believe that adopting a conscious and balanced style that makes use of both the carrot and the stick is the most appropriate engagement approach for our investee companies facing a very diverse range of business realities in the region.

In our next blog in this series, we will look at our engagement priorities in Asia ex-Japan, and some of the key stakeholder groups that we plan to work with in order to use our voice and influence as a global investor and steward of our clients’ assets.



1. https://ink.library.smu.edu.sg/cgi/viewcontent.cgi?article=5958&context=sol_research

2. The+Role+of+Asia+Pacific+in+Global+Supply+Chain.pdf (cushmanwakefield.com)

3. UNFPA Asiapacific | Population trends

4. https://www.spglobal.com/_assets/documents/ratings/research/101574780.pdf

5. https://www.iea.org/reports/renewables-2022/renewable-electricity

6. LGIM/ISS data as at September 2023

Trista Chen

Head of Investment Stewardship Asia (ex Japan)

Based in Singapore, Trista is Head of Investment Stewardship Asia (ex Japan) at LGIM. She is responsible for driving the firm’s global investment stewardship strategy with a localised approach in the region. Trista is a seasoned sustainability professional, with close to 20 years of experience and an in-depth understanding of the fast-evolving ESG and climate change landscapes in the international market. She has advised investors and companies at the corporate and project level in 30+ countries in Asia Pacific, Europe, North America, Latin America and Africa. Prior to joining LGIM, Trista was a partner with global sustainability consultancy firm ERM, accountable for the firm’s financial services industry and M&A service strategy in APAC. She holds a Master of Environmental Design degree from the University of Calgary in Canada and earned a degree in Bachelor of Science, Honours Science and Business - Chemistry Minor from the University of Waterloo in Canada.

Trista Chen