Q. Are you concerned that greenwashing is coming under greater scrutiny in Asia?
Tang Zongzhong: We take this issue very seriously. In Asia Pacific, regulators have not yet begun to confront the greenwashing question, but we have LPs from all around the world, including Europe and North America, and they are really focused on this. Also, Baring Private Equity Asia is becoming part of EQT, which is a listed company, and that brings new responsibilities.
Greenwashing is going to climb the agenda in Asia Pacific. Right now, a lot of businesses and investors are at a very low starting point; they're just working out how to think about ESG, but they haven't got much further than setting an ambitious target and publishing a glossy report. That's not going to be enough; we have to think about this as an operational performance issue.
Q. How can businesses operationalize ESG in that sense?
Tang Zongzhong: It starts with having the data, because that's how you confirm the work you've been doing and its impact. We've just hired a data specialist to focus on ESG data alone, because we felt that if we didn't have that expertise, we wouldn't even be able to get to the foundational part of ESG.
Q. Do portfolio businesses have the data you need for ESG?
Tang Zongzhong: It varies. We've invested in several listed companies, taking them private, and many of them have done a good job on data and reporting. But with others, particularly smaller, privately owned companies, we're starting from scratch. One of the first things we have to do once an investment completes is set up data tracking systems.
Still, it can be difficult. It's not just a matter of having those systems; you also need expertise. It's quite a technical job to calculate the company's carbon emissions. Businesses need help with that.
That's one way we can add value as an investor, sharing our own experience and ideas that have worked at other businesses in which we have invested.
Q. Are those ideas welcomed?
Tang Zongzhong: We're getting a warmer welcome than in the past; the trend is going in the right direction. There are some companies that really get ESG; they feel the pressure from their customers, their peers, and other stakeholders, and they're coming to us to ask for help on how to do better.
That said, there is also a group of companies that don't really believe in ESG. They know they must do it, so they'll work with us, but they're not convinced about the business case. We have to work harder with those businesses to show them the benefits they can look forward to, such as more affordable finance.
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