Appetite for socially responsible investments in Asia is growing but fund managers say there are still major obstacles that prevent more significant investment in such assets.

Asia now has 71 signatories to the United Nations-backed Principles for Responsible Investing (PRI), from seven in 2006. Funds controlled by global signatories, many of whom invest in Asia, have surged to $59 trillion from $4 trillion in 2006.

While the numbers look impressive, a majority of asset owners haven't implemented investment policies that follow environment, social and governance (ESG) best practices, according to a March paper by the PRI organisation on the need for asset owners to drive responsible investment.

The reasons: a focus on short-term returns; high cost of ESG research; a dearth of qualifying investments; and few repercussions for inaction.

"If the big pension funds, endowment funds start to say we're only going to invest in funds that take ESG into account, then funds globally are going to have to start taking that into account," said Michel Lowy, chief executive officer of boutique fixed income firm SC Lowy in Hong Kong.

"But so far, financial performance has been the only way funds have been judged."

Reporting and enforcement frameworks tend to be ineffective in bringing about a change in standards.

New Zealand Superannuation Fund, a largely passive investor, has contracted a specialist firm to engage over 1,000 companies whose ESG standards do not stack up.

Poor reporting in Asia can make identifying responsible investments difficult, said Anne Maree O'Connor, head of responsible investment at the pension fund, a PRI signatory.

"There's often a lack of legal requirements, it's often voluntary and sometimes the metrics used can be quite inconsistent between companies within the same sector," she said.

Such voluntary measures include stewardship codes, which are established or being considered in Japan, Malaysia, Hong Kong, Taiwan, South Korea and Singapore.

Additionally, ESG-based indices in Malaysia and Japan are signs of progress, said Jacky Prudhomme, head of ESG integration at BNP Paribas Investment Partners, a PRI signatory.

However, he also notes sectors where environmental and social concerns linger, such as palm oil, a major Southeast Asian export steeped in controversy.

ESG's increasing importance has brought about new research and ratings from providers such as MSCI, Morningstar and FTSE.

Being a relatively new market research area, though, means strong analysis remains expensive.

"There are so many data providers that you still need to develop your inhouse expertise to be selective and to understand which data are more material," said Prudhomme.