The COVID-19 pandemic has helped to broaden the scope of the region’s investors when it comes to ESG integration, with many now focusing on themes around social inequality and not just those related to the environment.
“The pandemic has encouraged us to look at what makes businesses resilient and what are the key aspects that we actually need to resolve in terms of the disruption, such as [the] healthcare and education segment,” Mario Knoepfel, head of sustainable investing advisory, Asia Pacific, at UBS Global Wealth Management, told attendees at Asian Private Banker‘s Income Week 2021: What’s next in ESG investing? webinar, on Wednesday.
Panellists at the event pointed out that the global health crisis had shone a spotlight on societal issues such as access to healthcare and education, which were increasingly getting the attention of investors. Prior to the pandemic, ESG-related conversations were much more focused on environmental and climate matters.
However, Lina Lim, regional head of discretionary and funds, Asia Pacific, at HSBC private Banking, pointed out that there are limited available solutions that cater to the ‘S’ pillar of ESG.
“We have been looking for good managers who can showcase their capability to manage portfolios focusing on sectors such as social equality. For healthcare, we do have quite a number of the strategies but for themes like social equality, there are very limited strategies out there,” Lim said.
“As a fund selector, it will be better for us to have more options, so we are able to compare different managers and choose the best in class, but we are not there yet today. I have been engaging with a lot of managers in terms of pipeline planning going into next year and a couple of managers are already looking into this area,” she added.
Gabriel Wilson-Otto, director of sustainable investing at Fidelity International, noted that one reason for this could be due to a paucity of data when it comes to certain social themes. “When we’re talking about ‘S’, it really has to be a qualitative assessment and often can’t be backed up by a lot of hard data”.
“There are other problems about inequality and diversity. In some markets, it’s actually illegal to collect certain information about the employees, so it can be quite challenging to build up these sorts of funds on a quantitative basis,” he added.
Trying to encompass these initiatives into individual funds can be challenging because societal outcomes are tied to how companies act, particularly on issues like diversity and gender representation.
“But the potential to translate that into broader investments and to make sure that we’re actually having an impact starts to become challenging in terms of how we can measure and represent that,” he added.
Data disclosure on the rise
More positively, Wilson-Otto noted that the availability of ESG-related data in Asia has improved significantly in the last five years.
“We’re seeing relatively more strong data disclosure from large listed entities, which have fantastic disclosure, and ESG characteristics on par with European peers. There have been fantastic initiatives by a lot of stock exchanges including [the] Hong Kong exchange in order to mandate ESG disclosure.”
“However, mandating disclosure does not necessarily mean people can receive the right information, or change how an issuer reacts. So, although the data is improved and there are some great players in the market, the gaps still exist,” he noted.
Nearly three in four (72%) of global affluent investors believe they have a responsibility to “make the world a better place” by investing responsibly and sustainably, a survey by Standard Chartered found last month, while 75% believe that doing good and making a good return are not mutually exclusive.
As the momentum of ESG continues to gain traction, how are private banks continuing to adapt their sustainable investment offerings and how are they encouraging investors to shift to a more sustainable portfolio?
Discover what’s next on the sustainability journey in our recent webinar, featuring Fidelity International, HSBC Private Banking and UBS Global Wealth Management.