Sustainable investments could unlock Singapore’s US$91b of retail capital potential: report

ADDRESSING and overcoming key barriers towards sustainable investing could present a US$91 billion retail capital opportunity for Singapore, according to a recent report by Standard Chartered.

Based on data from the bank’s latest Sustainable Banking Report 2022, more Singapore investors are showing interest in sustainable investments with 37 per cent of survey respondents expecting to have more than 15 per cent of their investment portfolio in the next 2-3 years – up from the current 24 per cent of investors.

Lower adoption rates however suggest there is an untapped opportunity for more to direct their investment dollars towards sustainable investments, said Standard Chartered in a press statement Tuesday (Sep 27).

Perceived low returns and higher risk was cited as the top (49 per cent) barrier to sustainable investing as such investments are believed to underperform against traditional assets with similar risk profiles.

Other concerns include comparability (48 per cent), with all investors who selected this reservation indicating that it is difficult to compare sustainable investment opportunities within the same asset class.

Lastly, 47 per cent of respondents expressed concern over comprehensibility as they believed there was too little information, or lack of granularity, to help them understand and assess the impact of sustainable investments on ESG (environmental, social, and corporate governance) issues.

“We recognise that sustainable investing needs to be made relevant in order to bolster interest and improve adoption,” said Eugene Puar, Standard Chartered’s regional head of wealth management for Asean and South Asia as well as head of wealth management for Singapore.

“By addressing investors’ concerns with professional advice and education, we remove barriers so investors can make more informed choices that will achieve both financial returns and purpose,” he added.

Noting rising domestic wealth and net personal wealth in Singapore along with “burgeoning interest in the ecosystem of sustainable banking products”, Standard Chartered said it sees high potential for sustainable investments to grow in the city state.

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The bank said its assets under management have increased by 4 times since the beginning of 2021 with the rise of interest in sustainable ESG funds.

Top ESG priorities for investors in Singapore include climate change and carbon emissions (46 per cent), food and water scarcity (31 per cent) as well as pollution and waste management (24 per cent).

Motivations for sustainable investments among all investors surveyed in Singapore include enhancing financial returns (35 per cent), making a positive social impact (33 per cent) and helping to restore the environment (32 per cent).

Among investor segments, a notable 33 per cent of affluent investors indicated either of the latter 2 as one of their top motivations – while enhancing financial returns was the topmost sustainable investing motivation among emerging affluent investors.