The pandemic has proven a time to shine for mandates that invest with ESG principles in mind. Fueled by an accelerated appetite for sustainable funds in Asia, Morningstar data for the third quarter of 2020, for example, showed a record high $8.7 billion of net inflows. This helped total ESG fund assets in Asia to reach $25.1 billion, up 75% from the previous quarter.
Investing through an ESG lens has become more common in line with growing evidence that companies with good characteristics are expected to be more resilient during a crisis. Yet it is easier said than done to find relevant investments, integrate ESG in decision making and evaluate different managers and strategies.
To assess the tangible influence of ESG on portfolios and on potential drivers for future engagement, a new survey by AsianInvestor, in collaboration with S&P Dow Jones Indices (S&P DJI), gathered insights from 85 senior investment executives in October and November 2020.
Key take-aways from these government entities, insurers, pension funds, private banks and other investors – across, Hong Kong, Taiwan, Australia, South Korea, Japan, Singapore, Thailand, Malaysia, Indonesia, the Philippines and India – include:
- Just over 70% have less than 10% of their current AUM invested in ESG-related mandates
- Amid the pandemic, 49% of investors have either already increased their exposure to ESG funds, or plan to – however, 46% of respondents said Covid-19 has made no difference to their ESG-related exposure
- The two key drivers to invest based on ESG factors are to improve returns and add longer-term portfolio resilience
- Environmental themes will see the biggest inflows in 2021 – especially clean energy and lower carbon emissions
- More standardised ESG data would have the biggest impact in encouraging investors to boost their ESG exposure
- Traditional metrics remain the preferred approach to assess different ESG funds – notably, the track record of the investment strategy and fund performance over the benchmark