Schroders and BlueOrchard highlight key trends in sustainable and impact investing at flagship 2021 Asia Financial Forum

Schroders’ Global Head of Distribution, Lieven Debruyne was joined by BlueOrchard Chairman Peter Fanconi as they explored the global trends for impact and sustainable investing at the 2021 Asia Financial Forum (AFF) in Hong Kong.

Sustainable investment has been identified globally as the fastest growing investment focus over the past 12 months, particularly in developed markets.

Lieven and Peter discussed the evolving impact and sustainable investment landscape and how these trends are influencing  emerging markets.

Lieven Debruyne, Global Head of Distribution, Schroders said:

“The traditional way of looking at investment has, until relatively recently, been two dimensional, focused on risk and return. However, we believe the future of assessing investment performance is going to be three dimensional, with the emphasis being on risk, return and impact. This transition is already underway, and we would argue that we are now witnessing the start of a new megatrend; that not all profits are created equally. 

“The way that we need to view corporate profitability is through impact-adjusted profits, and where asset managers need to be judged is on impact-related performance, i.e. what is the investment performance after allowing for the externalities of that performance?

 “Schroders Institutional Investor Study, a global survey of institutional investors which we conducted in 2020, reported that 71% of the investors in Asia Pacific that we spoke to expect sustainable investing to be significant, if not very significant, in their decision making when it comes to building their long-term portfolios. This is actually ahead of the global average of 66%.

“What this represents is that there is an increasing amount of consistency in how clients globally are changing the way that they think about financial returns. For many of our clients the way that profits are generated is becoming increasingly important, and we really believe that robust returns go hand-in-hand with sustainable investing.

Commenting on impact investing in Emerging Markets, Peter Fanconi, Chairman, BlueOrchard said:

The wide-ranging impact of the Covid-19 pandemic threatens to undo decades of progress made toward reducing poverty and inequality globally. Whereas Government support has been swift in most developed markets, it has largely been absent in emerging and frontier markets when it comes to supporting entrepreneurs and setting up effective support and recovery programmes.

 “Impact investing can play a pivotal part in aiding the recovery in emerging markets. As asset managers we can boost businesses in the developing world by investing funds in the country, or region, where the funds have been originated. This is a trend we have seen becoming increasingly prevalent, particularly in Asia.”

“Today, if you look at the opportunities to access impact investing this has dramatically expanded, with impact investing accessible through a wide range of asset classes. This has particularly been the case in emerging markets.

“Infrastructure, or green housing for example, are newer asset classes within impact investing that are gaining lots of momentum. In particular, infrastructure in emerging markets may yield substantially more than traditional asset classes.

“Investors are also becoming much more sophisticated in this space, and we will likely see a tremendous shift in assets from the traditional instruments to the impact vehicles. It’s not only the investors, but it’s also the regulators that we are seeing pushing for this shift. This is something that is happening in Europe now, but we’ll likely see this begin to happen globally as well.”