Dislocation from the coronavirus pandemic will accelerate the adoption of Environmental, Social and Governance (ESG) principles in the investment management industry, a new survey finds. The survey, conducted by the Investment Management Association of Singapore (IMAS) in June, involved 50 respondents who are mainly chief executive officers and chief investment officers of fund management companies based in Singapore.
Nearly seven in ten (66%) respondents believed the pandemic will accelerate the adoption of ESG investments, with 76% indicating that equities would attract the most interest and inflows. Among asset classes, multi-asset (12%) ranked second while alternatives (8%) ranked third.
Says Rajeev De Mello, chair of the IMAS Development Committee: “Before Covid-19 hit, we were already seeing strong sentiments about the adoption of ESG investments among our member firms. ESG was ranked the leading future driver of investment growth in the next three years, based on the IMAS 2020 Annual Survey released in January this year. The latest survey results put to bed that the adoption of ESG investments was a bull-market phenomenon.”
“We had anticipated that 2020 will be the biggest year yet for ESG, and the survey has demonstrated clearly that even Covid-19 has not dampened the pace of ESG adoption,” adds IMAS Executive Committee chair Susan Soh.
In the latest survey, lockdowns and re-openings (42%) topped the list of drivers for financial markets that have become more relevant during the Covid-19 period. The effects of the broad and significant easing in monetary policies around the world (32%) are viewed as the next most important driver for financial markets.
More than six in ten (64%) anticipate further monetary easing measures to help society and the economy recover from the pandemic. A minority (18%) expect that central banks have done enough to cushion the global economy or will pause while fiscal stimulus programs are implemented.
As regards threats to the industry, a delay in the development of Covid-19 vaccines (27%), particularly its impact on confidence, trade and travel, is seen as posing the highest risk. The shock that end investors feel by the scale of market movements over the last three months (22%) and the possibility of investors needing to raise cash (21%) to re-allocate their portfolios are also seen as posing significant risks.
Active equity took the lead (19%) as the top strategy that could grow in popularity next year, according to the survey. Meanwhile, 42% of respondents expect demand for passive instruments/exchange-traded funds to accelerate in the next decade compared to the previous decade.