Global Investor Study
Strong interest in sustainable investing amongst experienced investors
Sustainable investment has seen a huge increase in interest in the last decade, but definitions in this area can be confusing.
We are seeing a growing interest in sustainable investing in the market. The Schroders Global Investor Study 2018, which surveyed more than 22,000 investors in 30 markets, including 550 Hong Kong investors, showed that 82% of Hong Kong investors felt sustainable investing has become more important to them. 61% of Hong Kong people have increased their allocation to sustainable investments in the past five years. On average, sustainable investments represented a quarter (25%) of investment portfolios of Hong Kong investors.
Experienced investors have stronger interest in sustainable investing
Interestingly, we noticed the interest in sustainable investing was particularly pronounced amongst experienced investors. Hong Kong investors who felt they have higher levels of investment knowledge appeared to realise the benefit as they invested more of their total portfolio in sustainable investments.
Hong Kong people who considered themselves expert/advanced investors said they were investing an average of 28% of their portfolio in sustainable investments. That compared with 19% for those Hong Kong people who considered themselves beginner investors.
Compared to five years ago, 83% of expert/advanced investors in Hong Kong said sustainable investing has become more important and 64% of them have increased their investments in sustainable investment funds. In contrast, only 77% of beginner investors had the same view and 53% of them increased their sustainable investment. It suggested that experienced investors better understand the benefit of integrating sustainability into their investment portfolio.
What is sustainable investing?
Does the deviation in preference between experienced and less experienced investors come down to the understanding of sustainable investing? Indeed, research findings suggest mixed understanding. When they were being asked which phrases describe what “sustainable investing” is:
- Over half (58%) identified sustainable investing as “investing in companies that are likely to be more profitable because they are proactive in preparing for environmental and social changes”.
- Slightly less than half (46%) answered with “investing in companies because they are best-in-class when it comes to environmental or social issues or how the company is managed”.
- A third (32%) chose “investing that specifically avoids controversial companies, such as alcohol, tobacco or weapons manufacturing”.
Only one-in-nine (11%) Hong Kong investors showed a comprehensive understanding on sustainable investing and selected all three answers. Seemingly, there are still many investors who may not fully understand sustainable investing.
We believe using a sustainable investment approach is a key element to achieve long-term value. Invest in companies that can adjust their business based on ESG factors are more like to generate better returns. We encourage investors to learn more about this area.
However, sustainable investing is complex in nature and could be challenging for individual investors to fully research on their own when it comes to making actual investment decisions. As such, it is important for investors to find out whether an asset manager takes an integrated approach to sustainable investing throughout their investment process, in order to achieve better income and risk management.
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