In 2021, Asia’s allure for global investors will be offset by environmental, social, and governance (ESG) risks.

TOKYO/HANOI/SINGAPORE — On the outskirts of Ho Chi Minh City, construction is underway on one of the country’s largest infrastructure projects, according to Vietnamese Prime Minister Nguyen Xuan Phuc.

On paper, Long Thanh International Airport looks to be a sleek, futuristic hub with a capacity of 25 million passengers per year in 2025 and 100 million by 2040 — about the same as Vietnam’s current population and a large hub even by Southeast Asian standards. It will alleviate pressure on the city’s already-overburdened, delay-prone Tan Son Nhat International Airport, which is expected to expand.

The project demonstrates Vietnam’s aspirations as a developing country. These ambitions are heightened by a proposed goal of becoming a developed country by 2045. However, the country exemplifies a risk that investors will face as they venture into Asia: whether the region’s opportunities can match Western money managers’ growing emphasis on environmental, social, and governance factors.

The Vung Ang 2 coal-fired power project in the energy-hungry country has come under fire. Shareholders of one of the project’s participants, Japanese trading house Mitsubishi Corp., have been urged to either pressure the company to withdraw from the project or dump their shares, according to environmental groups.

The region’s infrastructure needs are driven by its fast economic growth. The International Monetary Fund expects emerging Asian economies to rebound strongly in 2021 with an 8.3% expansion, faster than the 5.1% growth rate predicted for the U.S. and 4.2% in the eurozone.

This forecast relies not only on China, which has largely contained the coronavirus and is project to log 8.1% growth next year. The rest of Asia looks strong as well, particularly India, which is projected to expand 11.5%.

The region “should see growth as a manufacturing hub that supports global supply chains,” particularly in high-tech fields, said Manabu Tamaru of Barings Japan.

Asian companies are proving resilient to the current crisis. The stock market’s consensus view is that forward earnings per share among the companies in MSCI’s Asia ex-Japan index will continue growing by double digits in 2021. The share of analysts with a “buy” recommendation for the region has risen to around 70% from 60% a year ago.

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