Hong Kong investors most concerned with governance in ESG, Schroders Global Investor Study 2018 finds

The Schroders Global Investor Study 2018, which surveyed over 22,000 investors across 30 markets, including 550 respondents in Hong Kong, highlighted that governance is the most important Environmental, Social and Governance (ESG) consideration to Hong Kong investors.

They cited fund managers’ most important area of engagement on a company they invest in was ending bribery or corruption, followed by environmental concerns such as pollution from operations and climate change, and finally social issues including treatment of company workforce and selling unhealthy or addictive products.

The study also found that Hong Kong investors trailed global counterparts in terms of considering ESG factors when investing, due to a lack of understanding.

Hongkongers allocate second least to sustainable investments, after Japan

Hong Kong investors reported collectively allocating one-fourth (25%) of the entire investment portfolio to sustainable investments, trailing behind their global (37%) and Asian counterparts (37%) by an obvious margin and leading Japan (24%) by one percentage point.

Yet, eight in ten (82%) Hong Kong investors felt sustainable investing was more important to them now, and six in ten (61%) had increased their sustainable investments compared to five years ago. These findings pointed out that sustainable investing is a growing trend.

Hongkongers don’t fully understand sustainable investing

Investors in Hong Kong felt that there were not enough sustainable investments available in Hong Kong, with over one-third of them (36%) citing the limited number of such options as their top barrier to investing in sustainable funds.

Chris Durack, CEO of Schroders Hong Kong, said:

“Leading active managers’ such as Schroders’ practice of integrating ESG principles within existing investment process answers to this demand for sustainable investments. Firm-wide integration includes identifying sustainably managed businesses, understanding the risks and opportunities of environmental and social change, and actively engaging to improve companies’ behaviours and governance.”

Jessica Ground, Head of Stewardship at Schroders, commented:

“Sustainable investing is complex in nature, and therefore should be considered in an active, holistic and forward-looking manner. ESG considerations are a good tool for managing risk, safeguarding investments and generating active returns. It is therefore important for investors to find out whether an asset manager takes an integrated approach to sustainable investing throughout their investment process.”

Chris Durack concluded:

“In this year’s Global Investor Study we see a mix of perceptions on sustainable investing across the region, influenced by subjective and varying definitions of ESG. While some investors in Hong Kong think there are limited options for sustainable investments, we believe the best practice is for active managers to factor in ESG across the investment process and explain this to investors.

“To help investors navigate sustainable investing, Schroders develops proprietary models to track and manage climate risks in investments, such as the Climate Progress Dashboard and the Carbon Value at Risk model launched last year. These tools measure the progress towards a decarbonised world and the impact of carbon costs on companies. We also share our views and analyses on relevant sectors by publishing quarterly Sustainable Investment Reports to help bridge the disconnect between investors’ perceived importance of ESG and the best strategies to invest sustainably.”

Schroders believes in delivering long-term value for clients, to which sustainable investing is an integral strategy. Schroders is an A+ UN PRI-rated asset manager and was ranked first in the 2017 ShareAction Responsible Investment Survey of Europe Asset Managers, as well as a Top 5 company in the 2017 AODP Global Climate Index. Schroders has a 12-strong team of ESG specialists with over 20 years of experience in firm-wide ESG integration.

For more on the Schroders Global Investor Study 2018, please visit www.schroders.com.hk/gis.