The Monetary Authority of Singapore (MAS) is allocating $1.8 billion of its Official Foreign Reserves (OFR) to five fund managers to invest into climate-related investment opportunities.
The fund allocation is part of MAS's recognition of the renewed sense of urgency and commitment to the climate agenda now the US has rejoined the Paris Climate Agreement.
The central bank and regulator is naming five, as yet unnamed, asset managers as part of the MAS Green Investment Programme (GIP), to manage new equity and fixed income mandates focused on climate change. AsianInvestor understands the managers, who are globally focused, are mainly European asset management firms.
As the trend for sustainable investing gathers pace, institutional investors and wealthy families have started to recognise thematic investment opportunities such as renewables.
Asset owners have increasingly integrated sustainability into their investment portfolios, whether by setting their own sustainable investment policy; limiting or stopping investments in certain activities like coal mining; or setting out expectations for their external managers.
Until recently, very few Asian institutions allocated to specific sustainable thematic investment opportunities, because “such allocations are perceived as too niche and may not fit so well with asset owners’ existing asset allocation buckets,” said Paul Milon, head of stewardship for Asia Pacific at BNP Paribas Asset Management.
This is set to change as both institutions and wealthy families are putting more emphasis on thematic investments such as alternative energy and broader energy transition themes, he told AsianInvestor.
Adoption of exchange-traded funds (ETFs) is set to rise over the next 12 months among investors from Greater China, as the Hong Kong Stock Exchange devise fee waivers and cross-listings with the Shanghai bourse to draw capital.
Thematic, cryptocurrency and sustainable ETF strategies in particular have generated interest from mainland China, Hong Kong and Taiwan investors, according to the 2021 Greater China ETF Investor Survey by private investment bank Brown Brothers Harriman.
More than half (56%) of the over 300 institutional investors surveyed said they have at least 25% of their portfolio invested in ETFs and 76% plan to increase their exposure to ETFs in the next 12 months.
“ETF adoption and usage are at varying stages across Greater China,” the report wrote. While 58% of Taiwanese investors and 66% of Hong Kong investors said they plan to increase their use of ETFs over the next year, the number was much higher on the mainland, where 92% of respondents plan to do the same.
Canadian public pension fund The Ontario Municipal Employees Retirement System is targeting opportunities in digital communications infrastructure as well as green investing for its Asia-Pacific infrastructure strategy.
The C$105 billion ($87 billion) fund plans to more than double its share of Apac infrastructure investments in five years’ time.
Its current infrastructure allocation of 22.5% exceeds that of most institutional investors’, and it is set to pour more than $2 billion into new investments.
Omers is also keen to expand beyond its current infrastructure investments in India and Australia, and Asia will be its preferred market – over Europe – when it comes to renewable energy infrastructure.
More data has shown that investing responsibly does not have to come at the expense of reduced returns. As a result, the appetite for environmental, social and governance investing has shot up in recent months.
Morningstar found 75% of ESG-screened indices it studied outperformed their broad market equivalents in 2020. Similarly, 57 of 65, or 88%, outperformed for the five years through the end of 2020.
But this may not be happening for the reasons that have been trotted out for many years now. Some critics argue that the link between ESG credentials and better returns is not clear-cut and might run in the opposite direction.