Asian investors putting more money in sustainable investing

Singapore

ASSET managers and owners in Asia are committing more funds to sustainable investments as long-term returns on such investments improve, according to BNP Paribas.

The French bank released survey findings on Tuesday showing that in two years' time, 55 per cent of institutional investors in Asia expect to allocate 50 to 75 per cent of their assets to funds that incorporate environmental, social and governance (ESG) factors. Currently, only 15 per cent of them hold between 50 to 75 per cent of their investments in ESG funds.

"ESG has been about managing risk but now it's seen as a source of alpha - a differentiator in trying to find better managed or quality investments that will drive a more sustainable, long-term return," explained Madhu Gayer, Singapore-based investment analytics and sustainability manager at BNP Paribas.

On whether the trend would see more investing in green bonds, Mr Gayer said that green bonds are definitely a key part of the investment strategy for investors in Asia. He noted that investing in green bonds have had the greatest impact on the sustainable investing strategy for 36 per cent of respondents in Asia. That said, green bonds will be invested in as part of investors' allocation to fixed income. Such bonds are not yet seen as its own asset class within investor portfolios, Mr Gayer said.

The survey covered 347 institutional investors who had at least US$1 billion of assets, including 110 investors from Asia. BNP Paribas itself, through its asset management arm, manages 222 billion euros (S$339 billion) of assets in ESG strategies as at end-2018.

Demand for sustainable investment also appears to be finally taking root among Asia's wealthy as their awareness grows.

Nearly a third, or 29 per cent, of rich Singaporeans said they would like to invest between 15 and 25 per cent of their funds in sustainable investments in the next three years, based on a survey by Standard Chartered Private Bank, also out on Tuesday. In Hong Kong, 27 per cent of investors said they would like to do so.

For high-net-worth Singaporeans, investing to eradicate hunger is their top priority, followed by providing affordable and clean energy, and alleviating poverty. Standard Chartered surveyed 421 affluent investors across Hong Kong, Singapore, the UAE and the UK, who each have at least US$1 million in investments, excluding real estate.

Sustainable investments have existed in recent years but did not quite take off due to a lack of understanding among investors, said Eugenia Koh, head of impact investing and engagement strategy. Some banks might also have pushed "too much, too quickly", leading clients to draw back, said Vic Malik, global head of investment advisory.

But now, the private bank has seen sustainable investing assets under management grow 13 per cent from the end of last year to the end of February this year. It is wooing the well-heeled who look to invest more conscientiously with efforts including training relationship managers.

The bank has industry experts give talks to relationship managers and clients share about what is important to them.

It has also launched an 'impact leaders community' involving over 50 top investment advisers and bankers who undergo dedicated training.