Sustainable investing – the investment approach of ’doing well by doing good’ – is gaining ground in Asia, according to our first ever study on how the region’s affluent consumers feel about impact investing.
Our research reveals that affluent and high-net-worth investors in Singapore, Hong Kong, China and India plan to increase the proportion of sustainable investments in their portfolios to an average of 19 per cent in three years (from 17 per cent currently), with Chinese investors leading the way with an expected allocation of 23 per cent by 2021.
Yet despite this growing appetite, the findings indicate a significant knowledge gap among the respondents on what sustainable investing is. Despite a staggering 86 per cent of them saying they are currently engaged in sustainable investments, only 16 per cent can provide even a partially accurate definition, demonstrating that they have a limited understanding of what it entails and the returns and impact it can achieve.
Who are Asia’s sustainable investors?
70 per cent of respondents in our research are ‘value seekers’, essentially investors who do not have a broad knowledge of sustainable the investment approach, whose interest is profit-driven and who expect their sustainable investments returns to be higher than mainstream opportunities (see table below).
While millennials are typically associated with leading the charge in the sustainable investing trend in Asia, our study reveals that mature investors – those aged 34-49 (generation X) – are joining the cause. A group of respondents whom we call the ‘altruistic investor’ – primarily made up of generation X – are more willing to accept a financial trade-off between doing good and generating returns.
Sustainable investing in Asia may be in its early days, but investor interest is clearly growing
Asia’s sustainable investors – who they are and what motivates them
|Type of investor||Demographic||Level of engagement||Motivations|
|Altruistic investor||Gen X (age 35-49), predominantly male||Understand and are engaged||
|Value seeker||Millennials (age 20-34), predominantly female||Engaged in but unable to correctly define||
|Unengaged||Boomers (age 50 and above)||Not currently engaged due to lack of information and perceived lower returns and high risk involved|
The main difference between the two generations of investors is that the millennials tend to be savvier in understanding that they do not always need to sacrifice their economic gains to make a positive impact.
“We believe that [this difference between generations of investors] will be a key differentiator in further developing the ecosystem, as well as moving sustainable investing into the mainstream,” says Vic Malik, our Head of Investment Advisory for Private Banking ASEAN & South Asia and Global South Asian Community.
What is sustainable investing?
Some call it impact investment, while others refer to it as socially responsible investing or values-based investing. So what exactly is sustainable investing?
“There are many faces to sustainable investing, depending on what an investor prefers to focus on when identifying an opportunity to pursue,” says Malik. “Broadly speaking, we define sustainable investment as investing capital in businesses, funds or other financial vehicles that actively seek to generate social and/or environmental benefits and financial returns,” he adds.
What’s next for sustainable investing in Asia?
“Sustainable investing in Asia may be in its early days, but investor interest is clearly growing,” says Malik.
Bridging the knowledge gap by educating investors on the available opportunities and the impact their investment dollars can have beyond financial gains, and how it doesn’t mean sacrificing investment returns, is the most pressing agenda, says Didier von Daeniken, our Global Head, Private Banking and Wealth Management. “Imagine being able to use your investment dollars to make a positive impact on society and the environment, while at the same time enjoy market-competitive returns.”
Click here to find out more about our sustainable investment offerings.