Nearly two thirds of Hong Kong and Singapore-based investors (63%) say that ESG and sustainability are now important factors in how they select investments, with this rising to 71% for Hongkongers in the higher income bracket (HK$1,000,000 and above per annum), according to a new study released today (2 September) by St James's Place Wealth Management Asia.
Titled ‘Wealthy, Healthy Planet - The Power of Personal Wealth in Sustainable Development', the research was based on a survey of approximately 2,000 affluent to high-net worth investors across Hong Kong and Singapore conducted in February and March 2021, showing that COVID-19 increasing the motivation of Hongkongers and Singaporeans towards responsible investing.
The results of the study also revealed that in Hong Kong and Singapore, close to two-thirds (64%) say they actively seek this information before investing.
The importance of ESG factors in investment decisions, is significantly higher for that of younger investors (25-34 years, 67%), as compared to older investors (45+ years, 60%) in Singapore.
COVID-19 has spotlighted many of the critical sustainability issues we face and motivated investors to play a role with how and where they invest."
Additionally, 43% of respondents said they are prepared to actively divest from companies that do not operate sustainably.
Gary Harvey, chief executive, SJP Singapore, said: "COVID-19 has spotlighted many of the critical sustainability issues we face and motivated investors to play a role with how and where they invest. There is a tremendous opportunity for private wealth to play a growing role in driving forward sustainability agendas in Asia and globally."
Despite increased interest in sustainable investing, the study further highlighted significant barriers.
More than half (54%) believed they need to compromise returns to invest responsibly, with 42% expressing that concerns over the performance of sustainable investments is a key barrier that prevents them from investing more responsibly.
Other key barriers for investing more responsibly include a lack of knowledge (48%), difficulty in accessing knowledge (43%) as well as a lack of sustainable investment options (37%).
"This underscores a growing need to bridge the intention-action gap through credible financial advice, considering how 87% of investors in Hong Kong and Singapore have highlighted a demand for better", it said.
Independent financial advisers were also among the top sources of advice for 40% of Singaporeans and 37% of Hongkongers.
"Closing this gap will require financial advisers to have the necessary skills and understanding of integrating ESG considerations in investment decisions and when advising clients as a first step to ensure that the long-term interests of investors are protected and maximised", the study added.
Angelina Lai, head of division, Asia Investment, SJP, said: "Despite the encouraging boost in investor appetite towards sustainable investing, more strides have to be made towards addressing the false belief that returns must be compromised in order to invest responsibly.
Over the past 12 months, we have seen the opposite in the performance of investments. With increased attention on sustainable corporate practices, we will see an increasing correlation between sustainability and financial performance in the future."
When looking at environmental, social and governance concerns, opinions were divided with Singaporean investors ranking environmental issues as the most pressing (37%) and Hong Kong investors ranking social issues as the most pressing (41%).
However, the study found that investors in Hong Kong and Singapore prioritising environmental issues are more likely to focus on ESG and sustainability factors when investing (72%) instead, compared with those focused on social issues (68%) and governance issues (45%).
Those prioritising environmental and social issues were more likely to divest from a company not operating responsibly at 46%, as opposed to those focused on governance at 35%.
Over half of those prioritising environmental issues (54%) also say their interest in sustainable investments is increasing, compared with social (43%) and governance (32%). In terms of individual issues, climate change, carbon emissions, social equality and poverty were seen to be the most pressing.
However, opinions were divided over whether there is enough regulation in place for companies to act more responsibly. 69% did not believe or were unsure if corporations are doing enough to solve social issues in Asia, and 68% for environmental issues.
Oliver Wickham, head of business, SJP Hong Kong and Shanghai, said: "COVID-19 has brought sustainability to the top of corporate agendas with environmental and social issues such as climate change and social equality being top concerns for Singaporeans and Hongkongers.
Even as ESG issues continue to grow in importance, investors that are best positioned for the future will be the ones that engage in purpose-driven investments and who try to find ways where their investments can be better allocated to achieve both sustainability and other important societal goals."