(Jan 31): Investors in Asia have a surprisingly high level of interest in sustainable investing, says UK-based asset manager Schroders. Its head of sustainable research, Andy Howard, notes that this is because the speed at which economies are changing in Asia is faster than anywhere else in the world.
“What that means is that a lot of issues, trends and changes that took quite a long time to play out in other parts of the world are now happening very, very quickly in Asia. So, if you look at something like climate change, for example, a lot of Asian economies have gone from being relatively small contributors to a problem, to being a big source of the problem; but, they are also among the leaders — in terms of companies and some countries — that are trying to address it. This makes Asia a really dynamic and interesting place [for those issues],” he told The Edge in an interview on the sidelines of the recent Schroders International Media Conference 2019 in London.
For example, China has, in a relatively short time, gone from being the biggest emitter of carbon dioxide in the world to also being the biggest investor in renewable energy, he adds. According to Schroders’ Global Investor Study 2019, Asian countries — particularly India, China, Indonesia, Thailand and Singapore — ranked the highest for having investors who were most concerned or keen on sustainable investments.
Seventy-three per cent of those surveyed in India already invest, or want to invest, in sustainability, followed by China (66%), Indonesia (62%), Thailand (60%) and Singapore (51%). More than 25,000 people from 32 locations globally were interviewed about their attitudes towards sustainable investing for the survey.
According to Howard, Asian countries have consistently come out at the top of the list in Schroders’ annual global investor study “for a number of years” now.
“It isn’t really surprising to us, but I think it’s often surprising to people who sort of perceive sustainable investing as being something that’s a bit European or Western. Whereas, in reality, people who are having to grapple with the problems created by rapid economic change — whether that be corruption, climate change, pollution, inequality — are often the ones who are most engaged with how [to address] sustainability in their day-to-day lives,” he says. Interestingly, in the latest survey, two Asian countries — India (87%) and Thailand (80%) — stood out as the most likely to believe their personal investment behaviour could have a wider impact. Japan was at the other end of the scale, with only 33% of people believing their investments can help contribute to a more sustainable world. The survey also revealed that almost nine in 10 (87%) of those from India always consider sustainability factors when investing, followed by 80% in China.
Howard notes, however, that the number of sustainable funds that are available in retail markets in Asia still lag those available elsewhere in the world. “There’s still room for significant growth in terms of Asian retail demand for sustainable funds.”
Taking the lead
Schroders itself, as a fund manager, is taking sustainability seriously. It recently announced that it would fully integrate environmental, social and governmental (ESG) analysis across all its funds by the end of 2020.
Schroders’ Sustainability Accreditation, which was launched by the firm in 2017, currently encompasses more than 50% — or £230 billion (RM1.22 trillion) — of its assets. Its target is for the accreditation to cover 100% of its funds by end-2020.
The accreditation — which covers the “Screened”, “Integrated”, “Sustainable” and “Impact” categories — helps Schroders’ clients distinguish how ESG factors are considered across its products. It is meant to help them understand the different roles that ESG plays in the investment process, and will be documented in the funds’ respective factsheets.
“As an active manager, we see sustainable investment as an integral and necessary part of our responsibility. Our clients are increasingly asking for ESG to be embedded into their portfolios and, in turn, we are also constantly seeking to improve how effectively we integrate ESG across Schroders’ investment desks. It is not just a tick-box process,” says Jessica Ground, Schroders’ global head of stewardship.
Howard played a key part in developing SustainEx, one of the sustainability tools Schroders uses that quantifies the positive and negative impact that companies have on society.
“SustainEx measures the costs companies would face if all of their negative externalities were priced, or the boost if benefits were recognised financially. [It] is designed to help our analysts, fund managers and clients identify those risks, and to help ensure they are reflected in investment decisions and valuations,” he says in a report on the tool.