Close to 90% of high-net-worth investors in Asia-Pacific interested in transition investing: StanChart
Investors believe companies from high-emitting sectors that have credible transition plans will be in a better position to future-proof their operations and assets
[SINGAPORE] Close to 90 per cent of high-net-worth (HNW) investors in Asia-Pacific are interested in transition investing, a recent survey published by Standard Chartered showed.
Of the 1,600 investors surveyed, 59 per cent indicated that they were very interested, while 29 per cent were interested.
Investors were polled across eight markets: Hong Kong, India, mainland China, Malaysia, Singapore, South Korea, Taiwan and the United Arab Emirates.
Transition investing involves channelling capital to heavy emitters for the purpose of decarbonising their businesses.
The survey found that the proportion of investors that were interested in transition investing were higher than the 83 per cent interested in sustainable investing, which typically refers to allocating capital to green companies or activities.
Among the eight markets surveyed, investors in Malaysia and Singapore were the second-most interested in transition investing at 91 per cent. India’s investors had the most appetite, at 93 per cent.
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Green hydrogen (49 per cent), low-emissions fuels (47 per cent) and carbon capture and storage (45 per cent) were the top three areas that investors were most interested in.
Among the top motivations for transition investing was the desire to make a positive environmental or social impact, with 57 per cent of investors indicating so.
An equal number were motivated to improve their investment returns. Reflecting personal values through investments came in third, at 52 per cent.
Investors believe companies from high-emitting sectors with credible transition plans will be ahead of their peers; such companies will also be in a better position to future-proof their operations and assets. Taken together, these advantages make them more attractive as an investment option, Standard Chartered said.
The report cited the International Energy Agency, which said US$125 million of capital expenditure is needed in six key sectors – including electricity, transport and buildings – to bring about net-zero carbon emissions by 2050.
“Private actors are expected to contribute 70 per cent of this financing, presenting a substantial opportunity for investors,” said the report.
Despite the strong interest, the survey found several barriers to transition investing.
The most commonly cited obstacle, at 50 per cent, was the perception that such forms of investing come with higher risks.
The lack of benchmarks to compare with other investment products (46 per cent), as well as the belief that transition investing has low returns (44 per cent), were the other top challenges cited by respondents.
The survey found that there was a knowledge gap among investors on what transition investing entails.
Only 15 per cent said that they fully understood the concept, while 67 per cent associated it with renewable energy investments; the remaining see it as a broader concept involving the mobilisation of capital to business transformation or leveraging market opportunities.
As for sustainable investing, the survey found that investors allocated about 24 per cent of their portfolios on average to such investments, even though they preferred it to be at around 34 per cent.
“The gap between current and preferred proportions highlights both enthusiasm for sustainable investing and potential for growth in the market, as investors seek products and strategies that better align with their sustainability goals,” said the report.
“Meeting this demand will require innovative financial instruments, enhanced transparency and robust frameworks to inspire confidence and attract further capital to the sector.”
Standard Chartered’s chief sustainability officer Marisa Drew said the commercial case for transition investing continues to grow, with the green economy delivering total returns of 198 per cent over the past 10 years – a performance outpaced only by tech stocks.
“The opportunity to finance the transition to a low-carbon economy is both more compelling and more crucial than ever,” she added.
She noted that US$2.4 trillion of climate-related investments is needed annually until 2030 across emerging and developing markets so that they will be able to implement their decarbonisation plans. This is a fourfold increase from current levels.
“To be able to address this gap, there is a need to attract all types of public and private capital, including capital from individual investors to support not only transition, but also adaptation and resilience, and the conservation and restoration of nature,” she added.
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