Divestments, ESG in focus as companies in Asia Pacific rebalance portfolios

Titled "Rebalancing your portfolio to fuel growth", the study, which surveyed 250 executives from companies with revenues over US$1 billion, revealed that businesses must adapt to evolving strategic goals and external pressures.

It highlighted five main factors pushing investors to reassess their asset allocation:

1. Geopolitical tensions affecting markets and supply chains
2. Capital efficiency regulations
3. Rising investor activism in Asia
4. ESG considerations and the transition to "green portfolios"
5. Increasing role of private equity in asset optimisation

The impact of these forces is evident in the high number of divestments expected. A staggering 79% of executives anticipate making at least two divestments in the next year and a half.

Furthermore, environment, social, governance (ESG) is emerging as a key driver in these divestments. Over half (52%) of respondents reported frequent discussions around ESG during recent divestitures, the study found. 

Additionally, alternative exit strategies, particularly those involving private equity participation, are gaining popularity, the report said.

Jiak See NG, Deloitte Asia Pacific strategy, risk, and transactions leader, said that the forces reshaping the global economy had a significant impact on companies throughout Asia Pacific. 

"Businesses must be proactive in rebalancing their portfolios to remain competitive and divestment ready," she said. 
 

Meanwhile, the report advocates for an "active portfolio management mindset" to build resilience and drive transformative growth. It recommends five key actions for businesses:

1. Adopt an “always-on” mindset for portfolio reviews
2. Assess portfolios on strategic fit, value creation potential, and resilience
3. Maximise value from poor-fitting assets
4. Integrate ESG as a central component of portfolio assessment
5. Consider tax implications in portfolio rebalancing transactions

David Hill, Deloitte Asia Pacific CEO, said that in an era of exponential technology and heightened focus on ESG, active portfolio management will be key to corporate success.

"We expect to see acquisitions and divestments driven by decarbonisation goals and advanced technology acquisition," he said. 

The report also noted that while 95% of surveyed executives had abandoned a sale in the last 12 months, suggesting a need for better divestment readiness.

Muralidhar MSK, Deloitte Southeast Asia strategy, risk and transactions regional managing partner, emphasised the importance of this strategy, particularly in markets like Singapore, where listed companies that have rebalanced their capital structures have outperformed the market.

As Asia Pacific companies navigate an increasingly complex business environment, this Deloitte report serves as a timely reminder of the importance of strategic portfolio management in driving growth and resilience.