A large majority of Hong Kong investors are drawn to sustainable funds (88%), primarily for environmental concerns, although they also want to exert influence in relation to societal issues, the Schroders Global Investor Study 2022 has found.
Environmental impact remains the most attractive feature of sustainable funds (51%) for investors, followed by alignment with their societal principles (38%).
Investment returns remain crucial to investors, but many believe that sustainable practices are tied to greater profitability and success over the long term, with 63% in Hong Kong taking that view.
The sustainability-focused findings of Schroders’ flagship study, which surveyed over 23,000 people who invest from 33 locations globally including 500 from Hong Kong, also found that among those who recognise the attractiveness of sustainable funds, 58% of them said sustainability as a thematic investment has become more attractive in the last six months.
Drivers for sustainable investments
Hong Kong investors said the most important driver that would encourage them to increase their sustainable investments is the ability to choose investments that are aligned to their personal sustainability preferences (77%), followed by data or evidence that shows investing sustainably delivers better returns (42%).
As such, many investors are considering sustainable funds in their investment strategies, with 59% of them already investing up to 30% of their portfolios in this way. Overall, investors in Hong Kong have nearly a quarter (24%) of their portfolios allocated to sustainable investments.
They are also increasingly realising that investment practices have an important role to play in tackling global sustainability issues. 65% of Hong Kong investors agree that investment can drive progress in sustainability challenges such as climate change. Specifically on climate change, 74% of investors view this as a key concern.
Amy Cho, Chief Executive Officer, Hong Kong and Deputy Head, Asia Pacific, commented:
“We are excited to see Hong Kong investors’ interest in exploring sustainable investments are favourably on the rise, and that many of them are already taking action. This goes to show that investors are increasingly paying attention to the environmental, social, and governance (ESG)-related issues around them, and seeking out investment solutions that could have lasting positive impact on the world.”
Desire to make an impact
When it comes to the desired area of impact from sustainable investments, there is a diverse range of specific environmental and societal interests. Investors in Hong Kong want their investments to have an impact primarily on improving health and wellbeing (45%), quality of education (42%), and clean water and sanitation (37%).
Despite wanting to make a positive impact through their investment portfolios, 70% of those surveyed in Hong Kong still see the lack of transparency and reported data from providers about the impact of sustainable investments as the biggest barrier to increasing this type of investment.
Financial education is a key element in driving more capital towards sustainable investing. The more people who are able to understand the products they invest in and their impact on society and the environment, the more capital the financial markets should see flowing into sustainable investing.
This goes to show that what people seek is essentially guidance and clarity. Encouragingly, investors in Hong Kong are willing to learn more about sustainable investments, with nearly half (48%) saying they have access to and engage with education about sustainable investments in general. They are also engaging with data or evidence that shows investing sustainably delivers better returns (42%), while some look to their financial adviser to outline their sustainable investment options (40%).
Each quarter, Schroders provides an update on the themes shaping the sustainability landscape. These reports have been created to demonstrate Schroders’ commitment to integrating ESG factors into the firm’s investment processes.
Amy Cho commented:
“While some investors are still looking for convictions to increase their sustainable investments, it is also encouraging to see that they are eager to learn more about the different types of sustainable investments available and aligning their portfolios with their personal sustainability preferences. Our online ‘Beyond Profit’ resource hub is available to all investors to empower them to better understand the concept of sustainable investing.”
“Schroders has been taking proactive steps to ensure that our investment actions are harmonised with our clients’ sustainability objectives, from launching proprietary assessment tools such as SustainEx to having integrated ESG factors into our investment decision making since 2020. SustainEx identifies unpriced future risks through forward-looking measurement of 30+ environmental and social impacts that are yet to be reflected in financial statements, thereby supporting our investment teams in assessing impact, areas of risk and possible engagement topics.”
“We welcome the identification of relevant Hong Kong authorised ESG funds through a publicly-available list1 by the authority, which provides additional reference to investors seeking to exercise influence through their investments.”
Schroders offers various ESG strategies by region such as Europe, the US and Asia, and by theme and trend such as Climate Change, Health Innovation, Sustainable Food & Water and Global Cities.
To find out more about Schroders Global Investor Study 2022, please click here.
1 Inclusion on the list of ESG funds does not constitute an official recommendation or endorsement of these products or a guarantee of their ESG attributes or related performance by the Securities and Futures Commission (SFC). Authorisation by the SFC does not mean that the product is suitable for any particular investor. For more details, please refer to https://www.sfc.hk/en/Regulatory-functions/Products/List-of-ESG-funds
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