Report highlights structural shift in sustainable investing

Investing responsibly is gathering momentum across the globe, though Asia still lags far behind Europe, but this may change as Asia’s wealth shifts over to millennial investors

Global sustainable-investing assets grew 34% to US$30.7 trillion in 2018 from US$22.9 trillion in 2016, according to the latest data by Global Sustainable Investment Alliance (GSIA).

Jason Low, strategist, DBS Bank, says, “In Asia, the Global Sustainable Investment Review revealed that there had been a 16% increase in sustainable-investment assets between 2014 and 2016. This reaffirms our view that the inflows into sustainable investing is structural.”

Investor interest in “responsible investment products” is increasing from institutional investors and wealth management clients globally, he adds. These products typically factor in environmental, social, and governance (ESG) measures. The United Nations (UN)-backed Principles for Responsible Investment also show a shift toward the incorporation of ESG factors in investment decision-making.

In 2017, a DBS research collaboration with the UN Environment Programme (UNEP) found that in the Association of Southeast Asian Nations (ASEAN), there was demand for an estimated US$3 trillion of investment to be pumped into “green investments” from 2016-30.

“There is immense growth potential for sustainable investments, both regionally and globally. 66% of global consumers are willing to pay more for a sustainable brand and 73% of Millennials are prepared to pay extra for a sustainable offer, according to studies by Nielsen,” adds Low.

Research suggest assets managed under responsible-investment strategies remain extremely low in Asia ex-Japan, at only 0.8% of total assets under management (AUM) in 2016 compared to 53% in Europe, according to GSIA. Indeed, investors in Asia ex-Japan have not caught up in a big way, compared to the rest of the world. Further, over US$30 trillion of wealth will be transferred from Baby Boomers to 90 million millennials over the next few decades.

"In Asia, about 35% of wealth will be in the hands of millennials over the next five to seven years, resulting in the highest rate of change in any region. According to several global surveys, millennials are keen on sustainable investing. In fact, investors from this group are nearly twice as likely to invest in companies or funds which target specific social or environmental outcomes. Sustainable investing is becoming increasingly compelling, given the increasing awareness among them," Low adds.

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Date

20 May 2019

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