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Asian ESG wave gathers pace as consumers and start-ups buy in



Mouthfuls of succulent Korean barbecued beef doused in deep red ssamjang hot sauce — a dish served everywhere from Michelin-starred restaurants to street-side stalls — does not usually invoke thoughts of sustainability. Zikooin wants to change that.

The Seoul-based start-up has developed technology that turns grains, oats and nuts into Unlimeat, an alternative to the popular Korean-style beef. The company attracted $4m in its first round of fundraising, mostly from US venture capital, and is now expanding from Seoul into markets and restaurants in Hong Kong, Shanghai and the US.

Zikooin is part of a growing trend in Asia: the adoption of alternative ways of life to help counter the damage inflicted on the planet during decades of rapid economic development.

“For Europe and America, people started paying more attention to sustainability and the environment when they’re satisfied with their income,” says Seyeon Park, Zikooin’s sales manager. “Here [in Asia], it has just begun.”

Across an array of industries — including food production, energy, transport and financial markets — new companies and products are on the rise in Asia, underpinned by an ethos of environmental, social and corporate governance (ESG) thinking.

There is optimism that the ESG wave in Asia will gather more pace as the world’s unprecedented stimulus and record-low interest rates — which governments and central banks have deployed in response to the economic fallout from the coronavirus — funnel more cash into eco-friendly businesses.

Investment into cleaner energy in Asia is “going into overdrive”, says Edgare Kerkwijk, managing director of Asia Green Capital Partners, a Singapore-based developer of renewable energy projects in the region. He adds that Asia is far behind similar transitions away from fossil fuels under way in parts of Europe for decades.

While many of Asia’s biggest corporates — including tech manufacturers and banks — still face sharp criticism from environmental activists and international institutional investors alike for being too slow to ditch their dependence on fossil fuels, a new generation of consumers and entrepreneurs are forcing change.

“It’s not only the governments that are saying, ‘OK, maybe we need to do this’. Public opinion has moved and companies are now very cautious of being associated with anything that’s not sustainable or green,” Mr Kerkwijk says. “A lot of young people are setting up sustainability start-ups . . . It is because we have so much more to do — everyone sees this as a commercial opportunity.”

One of the barriers to growth of ESG in Asia stems from investors and governments struggling to adapt to longer-term horizons for policy direction and funding, both of which are required to create entirely new industries and supply chains.

Horace Luke, founder of Taiwan e-scooter maker Gogoro, was among those to see the potential of the green transition years ago.

Horace Luke, founder and chief executive of Gogoro, an e-scooter maker © Billy H.C. Kwok/Bloomberg

Mr Luke, who played a key role in developing Microsoft’s Xbox and HTC’s smartphones before founding Gogoro in 2011, says many traditional investors in Asia have stayed focused on short-term returns, rather than shift to the “patient capital” needed to fund new infrastructure, such as that associated with the “inevitable” switch to electric vehicles.

“That is hard, because it takes a lot of investment, a lot of discipline, a lot of convincing investors: ‘Be patient, be patient, the world is changing’, he says. “Some believe me, some don’t.”

Gogoro has sold more than 340,000 vehicles, has thousands of battery swapping stations across Taiwan and has expanded into France, Germany, Japan and South Korea, as well as attracting investment from local and offshore funds.

Greenwashing — corporates and governments marketing themselves as environmentally friendly rather than taking real action — also remains a problem. But tech-savvy entrepreneurs are finding new ways to improve transparency and hold corporates to account. This is an important development in places such as South Korea, where challenging the reputation of the sprawling chaebol — the family-owned companies that have long dominated the country’s economy — risks serious consequences.

Thomas Yoon, founder of Seoul ESG consultancy Who’s Good, says that when he came into the industry in the early 2010s Korean companies were simply fabricating ESG data — a major risk to investors.

His company now uses artificial intelligence and automation to independently identify ESG risk across hundreds of South Korean businesses. Who’s Good’s latest annual report identified ESG problems at 164 of the companies listed on the Kospi 200 index, a majority of which related to governance issues.

“Ultimately, the development of data analytics technology will solve the problems of existing ESG assessments, identify sustainable enterprises that have been overlooked in the past, and solve the challenge of correlating ESG with financial performance,” says Mr Yoon.

The message from entrepreneurs involved in ESG in Asia is resoundingly positive, however, particularly after Xi Jinping, China’s president, pledged at the UN that China would be carbon neutral by 2060. Similar promises by the leaders of Japan and South Korea followed.

“[US president Donald] Trump was blaming everybody else,” says Mr Kerkwijk. “The Chinese made probably one of the most significant statements ever.”

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Oil hits highest price since April 2019 before moderating




The price of crude oil briefly hit its highest level for more than two years on Monday, lifting shares in energy companies, as traders banked on strong demand from the rebounding manufacturing and travel industries.

Brent crude crossed $75 a barrel for the first time since April 2019 before falling back slightly, while energy shares were the top performers on an otherwise lacklustre Stoxx Europe 600 index, gaining 0.7 per cent.

The international oil benchmark has risen around 50 per cent this year, underscoring strong demand ahead of next week’s meeting of the Opec+ group of oil-producing nations.

US manufacturing activity expanded at a record rate in May, according to a purchasing managers’ index produced by IHS Markit. Air travel in the EU has reached almost 50 per cent of pre-pandemic levels, ahead of the July 1 introduction of passes that will allow vaccinated or Covid-negative people to move freely.

“This is a higher consuming part of the year,” said Pictet multi-asset investment manager Shaniel Ramjee, referring to the summer travel season. “And the oil market is pricing in strong near-term demand that is better than previous expectations.”

In stock markets, the Stoxx Europe 600 dipped 0.3 per cent while futures markets signalled Wall Street’s S&P 500 share index would add 0.1 per cent at the New York opening bell.

The yield on the 10-year US Treasury was steady at 1.494 per cent. Germany’s equivalent Bund yield gained 0.02 percentage points to minus 0.154 per cent.

Equity and bond markets have consolidated after an erratic few sessions since US central bank officials last week put out forecasts indicating the first post-pandemic interest rate rise might come in 2023, a year earlier than previously thought.

US shares tumbled last week, while government bonds rallied, on fears of tighter monetary policy derailing the global economic recovery.

Wall Street equities then bounced back on Monday, with a follow-on rally in some Asian markets on Tuesday, as sentiment got a boost from more dovish commentary from Fed officials.

Fed chair Jay Powell, in prepared remarks ahead of congressional testimony later on Tuesday said the central bank “will do everything we can to support the economy for as long as it takes to complete the recovery”.

John Williams, president of the Federal Reserve Bank of New York, also said that the US economy was not ready yet for the central bank to start pulling back its hefty monetary support.

Jean Boivin, head of the BlackRock Investment Institute, said that “the Fed’s new outlook will not translate into significantly higher policy rates any time soon”.

“We may see bouts of market volatility . . . but we advocate staying invested and looking through any turbulence,” Boivin added.

The dollar index, which measures the greenback against trading partners’ currencies and has been boosted by expectations of US interest rates moving higher before other major central banks take action, was steady at around a two-month high.

The euro dipped 0.1 per cent against the dollar to purchase $1.1901, around its lowest level since early April. Sterling also lost 0.1 per cent to $1.3909.

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Wall Street rebounds as markets adjust to Fed rate rise outlook




Wall Street stocks bounced back and government bonds softened on Monday following tumultuous moves last week after the Federal Reserve took a hawkish shift on interest rates and inflation.

The S&P 500 added 1.2 per cent in early New York dealings. The share index’s resurgence came after it posted its worst performance in almost four months last week in the wake of Fed officials signalling the central bank could raise rates to tame inflation sooner than investors had expected.

The yield on the benchmark 10-year US Treasury bond dropped sharply last week as investors viewed the Fed as ready to control surges in inflation that erode the returns from fixed interest securities. On Monday it rose 0.02 percentage points to 1.472 per cent.

Fed policymakers on Wednesday projected that interest rates would rise from record-low levels in 2023, from their earlier median forecast of 2024. James Bullard, president of the St Louis Fed, told television network CNBC on Friday that the first rate increase could come as soon as next year as inflation grew.

However, Gregory Perdon, co-chief investment officer at private bank Arbuthnot Latham, urged caution. “The facts are that the Fed hasn’t done anything yet. Wall Street loves to climb the wall of worry.”

Fed officials’ statements last week prompted fears of rapid policy tightening by the world’s most powerful central bank that could derail the global economic recovery from Covid-19. Investors also backed out of so-called reflation trades, which had involved selling government bonds and buying shares in companies that benefit from economic growth, such as materials producers and banks.

On Monday, however, energy, basic materials and banking stocks were the best performers on the S&P 500. The technology-focused Nasdaq Composite index was also up, gaining 0.7 per cent in early dealings.

The Russell 2000 index of smaller US companies, whose fortunes are viewed as pegged to economic growth, gained 1.7 per cent. Europe’s Stoxx 600 share index rose 0.7 per cent, with materials stocks at the top of its leaderboard.

The yield on the 30-year Treasury briefly fell below 2 per cent on Monday morning for the first time since February 2020 before bouncing back to 2.065 per cent.

Investors last week had taken profits on reflation trades that had become “crowded” and “expensive”, said Salman Baig, portfolio manager at Unigestion.

Baig added that, following the initial shocks after the Fed meeting, markets would probably return to betting on “a cyclical recovery as economies reopen”.

Other analysts said the bond market reaction had been too pessimistic, predicting a broad-based economic slowdown in response to Fed rate increases that had not happened yet.

The fall in long-term yields “is only justified if the Fed is making a policy error, choking the economy”, said Peter Chatwell, head of multi-asset strategy at Mizuho. “We think this is far from the truth — the Fed has simply sought to prevent inflation expectations from de-anchoring.”

Elsewhere in markets, the dollar index, which measures the greenback against other major currencies, dropped 0.3 per cent after gaining almost 2 per cent last week.

Brent crude, the international oil benchmark, rose 0.9 per cent to $74.18 a barrel.

Additional reporting by Tommy Stubbington in London

Unhedged — Markets, finance and strong opinion

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Saudis agree oil deal with Pakistan to counter Iran influence




Saudi Arabia has agreed to restart oil aid to Pakistan worth at least $1.5bn annually in July, according to officials in Islamabad, as Riyadh works to counter Iran’s influence in the region.

Riyadh demanded that Pakistan repay a $3bn loan last year after Islamabad pressured Saudi Arabia to criticise India’s nullification of Kashmir’s special status.

But the acrimony between the two longtime allies has eased after Imran Khan, the prime minister, met Saudi Crown Prince Mohammed bin Salman in May.

News of the oil deal with Pakistan comes as Saudi Arabia embarks on a diplomatic push with the US and Qatar to build a front against Iran, said analysts. Riyadh lifted a three-year blockade of Qatar in January in what experts said was an attempt to curry favour with the newly elected Joe Biden.

Pakistan had shifted closer to Saudi Arabia’s regional rivals Iran and Turkey, which, along with Malaysia, have sought to establish a Muslim bloc to rival the Saudi-led Organisation of Islamic Cooperation.

Khan has developed a strong rapport with President Recep Tayyip Erdogan, encouraging Pakistanis to watch the Turkish historical television series Dirilis Ertugrul (Ertugrul’s Resurrection) for its depiction of Islamic values.

Ali Shihabi, a Saudi commentator familiar with the leadership’s thinking, said that “bad blood” had accumulated between Riyadh and Islamabad, but recent bilateral meetings had “cleared the air” and reset relations to the extent that oil credit payments would restart soon.

A senior Pakistan government official said: “Our relations with Saudi Arabia have recovered from [a downturn] earlier. Saudi Arabia’s support will come through deferred payments [on oil] and the Saudis are looking to resume their investment plans in Pakistan.”

The Saudi offer is less than half of the previous oil facility of $3.4bn, which was put on hold when ties frayed.

But Fahad Rauf, head of equity research at Ismail Iqbal Securities in Karachi, said: “Any amount of dollars helps because time and again we face a current account crisis. And with these prices north of $70 a barrel anything helps.”

Pakistan’s foreign reserves were more than $16bn in June compared with about $7bn in 2019 before it entered its $6bn IMF programme.

Robin Mills at consultancy Qamar Energy said: “Saudi Arabia and Pakistan are allies, but their relationship has always been rocky. And the Pakistan-Iran relationship is better than you might think.”

Mills said that the timing of the Saudi gesture was “interesting” given that Iran was preparing to step up oil exports with the US considering easing sanctions.

“The Saudis are on a bridge-building mission more generally. They have sought to mend fences with the US and there is also the resumption of relations with Qatar,” he said.

Ahmed Rashid, an author of books on Afghanistan, Pakistan and the Taliban, said that there were a variety of factors that might have spurred Riyadh to restart the oil facility.

It may be “partially linked to the American need for bases” to launch counter-terrorism attacks in Afghanistan from Pakistan, he said, but added that its priority was probably to prevent Islamabad from falling under Tehran’s influence.

Rashid pointed out that Pakistan was caught between China, which has invested billions of dollars in infrastructure projects, and the US.

“Pakistan has to play it carefully, it is dependent on China for the Belt and Road, dependent on the west for loans,” said Rashi. “This is a very complex game.”

Anjli Raval in London and Simeon Kerr in Dubai

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