Covid-19 has brought to the fore the importance of environmental, social and governance (ESG) considerations in making investment decisions, but a lack of suitable investment products and limited investment choice have prevented many investors from incorporating sustainability factors into their portfolios.
In Singapore, 80% of investors believe ESG issues are central to managing their investments. However, there is a significant gap between what investors believe and their actions, as only 26% of their investments explicitly consider ESG factors, according to a new survey by HSBC Asset Management.
This might be due to a lack of knowledge on ESG investing. About 66% of investors in Singapore say they do not want to lose out financially when tackling ESG issues, while 58% say that although they would like to do more, they do not know how to approach this as an investor.
Within the next three to five years, almost half of investors (46%) believe their portfolio will comprise 100% sustainable investments. The key drivers for future take-up of ESG investments include products matching risk and return goals, a wider range of ESG investment vehicles and strategies, government incentives and better information on investment performance and ESG issues.
Patrice Conxicoeur, chief executive officer for Southeast Asia at HSBC Asset Management, says: “While awareness for ESG issues has increased, there is still a significant gap between investors’ intentions and actions in sustainable investing. However, we believe this can be a signal to future demand.
“As asset managers, what we need to do to support this is to provide continued investor education, product development and investment strategies that better embed ESG principles to meet investor goals.”
Despite an increase of ESG funds in the market, almost half of investors in Singapore (42%) point to a lack of sustainable investment products that meet their needs and concerns. In the survey, 38% say high costs remain a hurdle, while 36% do not want to limit the range of sectors or companies they invest in.
Financial advisers say about half of their clients in Singapore (51%) see ESG investments as important, but a shortage in suitable products (60%) is cited as the biggest barrier, followed by a lack of client demand for sustainable investment (57%). This indicates a need to raise the understanding of ESG investments among advisers and their clients.
When asked what would encourage them to take more interest in sustainable investing in the future, investors call for a wider range of investment vehicles and strategies using ESG (52%) and more information on what sustainable investment is and how it works (52%).
The survey, conducted in January and February 2021, was commissioned by HSBC Asset Management to study attitudes towards sustainable investing among mass investors and advisers in Hong Kong, mainland China, Singapore and the United Kingdom.