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More crazy-rich Asians consider ESG factors when investing: poll

IT appears that there is more to crazy-rich Asians than blatant consumerism after all, if a new study from Royal Bank of Canada (RBC) Wealth Management is anything to go by.

Almost three-quarters of all Asian high net worth individuals (HNWIs), or 72 per cent, say that it is important to consider environmental, social and governance (ESG) factors when investing – much higher compared with their Western peers. Only about 43 per cent of Western HNWIs say the same.

The study also found that the younger generation of Asia’s high net worth families believe that they view wealth differently from their parents, with 69 per cent of them saying so. This is compared with just 56 per cent of Western HNWIs.

Michael Reed, head of wealth management, South-east Asia and chief executive, RBC Singapore Branch, explained that this divergence in Asia is attributed to a changing of the guard.

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“In my experience, younger members of Asia’s global families, which are internationally mobile HNW families with financial interests that cross national borders, have been educated overseas and are returning to Asia with new ideas about how to manage family wealth,” he said.

“They increasingly see their investment activity as an extension of their ethical values, leading them to favour ESG factors.”

This is not to say that Western HNWIs do not favour ESG investments – quite the opposite.

Socially responsible investing (SRI) came about in the 1980s in Europe and then spread to the other Western markets, which later evolved into what is now considered mainstream practices.

“In Asia, however, ESG is a relatively newer concept, leading many of the clients I speak to in these markets being more likely to identify it as an active factor in making investment decisions rather than ‘standard operating procedure’,” said Mr Reed.

Even as more Asian HNWIs strive to do good, they are just as focused at growing their wealth.

More than 61 per cent of Asian respondents agree that their investment goal is “to increase wealth”, while only 45 per cent of HNWI respondents aim to do so.

Asian HNWIs are also more hands-on with their money; in Asia, 39 per cent of HNWIs classify themselves as “active investors” versus 29 per cent in the West, where passive investing is deeply entrenched.

This comes as fortunes in Asia are often younger than those in the West, with many families still in the process of building their wealth, according to RBC.

Asian HNWIs also seem to view the global economic slowdown more negatively compared to those in the West.

One particular worry for Asian HNWIs is the global economic uncertainty, with more than half (56 per cent) seeing it as one of their leading concerns, compared with 41 per cent of their Western peers.

In Asia, 39 per cent of HNWIs cited “cross border trade/tariffs” as a leading concern whereas only 27 per cent of Western HNWIs cited it as a key concern.

“This likely reflects the fact that Asian HNWIs – particularly those among Asia’s global families – often have relatively high exposure to international markets because of children attending school overseas, international property holdings or overseas investments,” said Vivian Kiang, head of wealth planning, RBC Wealth Management – Asia.

The study surveyed about 2,094 individuals between May-June 2019, including 440 respondents from four Asian economies: China, Hong Kong, Singapore and Taiwan. The survey included HNWIs (those with at least US$1 million in investable assets), adult children of HNWIs and those who are not yet HNWIs, but who have a minimum income of US$100,000.