J.P. Morgan Asset Management registered today (August 31) its Global Bond Opportunities Sustainable Fund for retail investors in Singapore. The Luxembourg-domiciled flexible bond strategy will invest in sustainable debt securities issued by companies and countries that demonstrate effective governance and superior management of environmental and social issues, JPMAM said in a statement.
The Monetary Authority of Singapore’s recently proposed environment risk management guidelines exemplifies regulatory moves across the Asian region to encourage the development of sustainable investment solutions, and this in turn will heighten investor appetite for funds with environmental, social and governance (ESG) themes, the asset management firm says. Demand may further intensify in the wake of Covid-19, which has focused investor attention on the impact that ESG factors have on long-term returns.
According to Morningstar, investors poured US$45.6 billion into sustainable funds worldwide in the first quarter of 2020, despite the pandemic-driven market sell-off happening at the time. US and European domiciled ESG funds, on average, outperformed traditional funds over the period. Equities mutual funds have been an early focus for ESG investors, but fixed income is quickly catching up in data, tools and insight.
“The need for well-diversified, globally flexible sustainable fixed income solutions is growing. Singaporean investors are in particular seeking sources of income in a low interest rate environment,” says Sherene Ban, JPMAM chief executive officer for Singapore and Southeast Asia.
Travis Spence, fixed income investment specialist at JPMAM, points to the surge of bond investor interest in sustainability that is contributing to more social sustainability bond issuance, as well as interest in climate change which continues to drive the growing green bond market. He expects green bond issuance to reach US$1 trillion in the next two years, from about US$500 billion currently.
“In the bond market, investors started by first focusing on the integration of ESG factors into investment decision-making, in order to ensure that material risks to cash flows were being considered. The market has now moved towards a dual focus on selective exclusions to help ensure portfolios match investor values as well as concentrating on securities that demonstrate superior sustainable characteristics,” says Spence.
The JP Morgan Global Bond Opportunities Sustainable Fund, which was first offered to investors in Europe, is now one of the largest sustainable unconstrained bond funds in the industry, according to the company. “While it is still a relatively new and quickly growing space in Singapore, we’ve been working closely with a number of clients on incorporating sustainability into their overall investment approach and we believe this trend will accelerate,” says Ban.