More than elsewhere, the impact of the global pandemic has sharpened Southeast Asian investors’ focus on environmental and social issues despite calls for greater sustainability-focused performance data, the Schroders Global Investor Study has found.
The sustainability-focused findings of Schroders’ flagship study, which surveyed nearly 24,000 people from 33 locations globally including Singapore, Malaysia, Thailand and Indonesia, found that 67% and 66% of Southeast Asian investors respectively (versus 57% and 55% globally) are now placing greater importance on social and environmental issues.
However, 65% (versus 53% globally) still believe that data/evidence demonstrating that investing sustainably delivers better returns would encourage them to increase their allocations.
A further 47% (versus 36% globally) of investors would like to see some form of self-certification from the investment manager that their investments are sustainable, while 46% (versus 40% globally) said that regular reporting highlighting the impact of their investments are having would motivate them to increase their sustainable investments.
COVID-19 has brought the issues of climate change and resilience to the forefront and key players in Southeast Asia have responded by ramping up their sustainability efforts. For one, the Singapore Exchange proposed mandating climate disclosures in accordance with the Task Force on Climate-related Financial Disclosures.
Meanwhile, Thailand’s Securities Exchange Commission will introduce mandatory ESG disclosure requirements in 2022.
The bulk of investors in the region are at ease with the prospect of embracing sustainability, with 67% of Southeast Asian investors (versus 57% globally) are feeling positive about moving to an entirely sustainable portfolio, so long as the same level of risk and diversification was maintained. Globally, this was most pronounced with younger people aged between 18-37 (60%).
This sentiment was mirrored strongly by investors in Thailand (76%), which topped the global list, and Indonesia (72%). Investors in Malaysia (62%) and Singapore (57%) also ranked highly.
Indeed, 62% (versus 52% globally) of Southeast Asian investors said the environmental impact of investing sustainably was the most appealing factor, ahead of 48% (versus 38% globally) who cited having greater chances of higher returns and 43% (versus 39% globally) who believe it’s aligned with their societal principles.
The study also delved into what controversies would drive people to withdraw from investments. Southeast Asian investors revealed that financial scandals (68%) and data privacy breach or cyber hacks (68%) are the most likely reasons. Some 60% of Southeast Asian investors also stated they would sell out if there were climate change catastrophes.
Investors are also increasingly expecting global action to be taken to address climate change. The study found that pressure was growing on almost all key global stakeholders – from governments, companies and even asset managers – to mitigate the impact.
More than three-quarters (77%) of investors in Southeast Asia (versus 74% globally) agree that this responsibility should fall on the shoulders of governments and regulators. While 74% (versus 68% globally) placed responsibility on companies for tackling climate change. However, the biggest change in sentiment over the past four years has been the growing role expected of asset managers.
61% of Southeast Asian investors (versus 53% globally) believe investment managers and major shareholders are responsible for mitigating climate change. This is substantially higher than the global average of 46% in 2020.
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