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Sustainable investing in Asia – closing the gap between conviction and action
A series of Q&A with Lombard Odier's Ecosystem1 of Strategic Alliances and close partners
In today's reality, the perception of sustainability is changing from just a “worthy cause" to a legitimate financial opportunity. We are seeing a huge reallocation of capital among investors as the world economy transitions from one that is Wasteful, Idle, Lopsided, Dirty (WILD) to a Circular, Lean, Inclusive, Clean model – we call this the CLIC® economy, one that generates a USD 5.5 trillion investment opportunity annually2.
Last year, we spoke to over 600 High Net-Worth Individuals (HNWIs) across Asia-Pacific, with 59% of respondents believing that sustainability will generate superior returns. With sustainability increasingly becoming a necessity in today's business environment, what does it mean for investors in Asia? How are they approaching sustainable investing? Lombard Odier's Ecosystem of Strategic Alliances shares more about what investors think in their individual markets, and their role in closing the gap between conviction and action.
Find out more about Our Ecosystem of Strategic Alliances at Lombard Odier in Asia
The bottom line: Leading the way through education to spur action
According to our survey findings, 64% of Filipino-based investors strongly believe that sustainability factors will lead to higher investment returns. This represents the second highest proportion amongst the eight3 markets polled. Comparatively, 52% of Filipino investors take sustainability into account when investing, signifying that there is still a gap between conviction and action.
Arlene Joan T. Agustin, Senior Vice-President, Private Banking Group Head, UnionBank of the Philippines commented, “We are seeing rising interest in sustainable investing but there isn't a lot of in-depth knowledge and information on this relatively new concept in our market. Clients still need to be guided especially in terms of structuring their portfolio in a way that is sustainable."
The Filipino market is not yet as mature when it comes to sustainability as investors delegate responsibility to their banks rather than monitor progress themselves. This presents an opportunity for banks in the Philippines to provide the right education and make a meaningful offering available. “This is the role UnionBank Private Banking seeks to fill and we aspire to be a thought-leader in the local space, to promote sustainable investing to the local investor," she added.
The bottom line: Private Banks as bridges between investors and sustainable investing
Similar to the Philippines, Thai investors are amongst the most positive in the region when it comes to sustainability, with 80% of Thai-based investors taking it into account when investing. This is the highest percentage across all countries polled. 61% believe that taking sustainability factors into account will deliver superior returns and 54% have already increased the portion of sustainable investment in their portfolio.
In this context, Thai investors therefore provide an ideal ground for banks to deploy their sustainable offerings, continue to educate them along the way, and convince the non-active investors about the unique opportunity.
Lombard Odier clinches 5 awards at the WealthBriefing Asia Awards 2022 including Award for Overall ESG (Environmental, Social, Governance) Offering
Jirawat Supornpaibul, Private Banking Group Head from KASIKORNBANK Thailand, explained, “Sustainability has always been a grand concept in the past, sometimes too grand that people find it hard to associate with themselves and in the action they take as an individual. However, with the recent pandemic and climate change, investors are placing increasing importance on sustainability both in their daily consumption and investment choices."
Aligned with their conviction and willingness to act on sustainability, Thai investors have high expectations of their banks ability to help them structure, monitor and actively manage the sustainable factors in their portfolio.
Mr. Jirawat noted that clients recognise the importance of sustainable investing but lack urgency in taking action. “Our private bankers understand the concept of sustainable investing, and many are highly convinced that this theme needs to be in our clients' portfolio," he added. In this sense, banks can act as an important bridge between investors and sustainable investing
The bottom line: More mature strategies needed for clients to zero in on the sustainability theme
Japan-based investors surveyed were the least convinced about the ability of sustainability to generate superior investment returns, with only 47% saying they believed it did, compared with a regional average of 59%. Only 9% surveyed increased sustainability factors in their portfolios, while 40% of those who have not, intend to do so in the near future.
Yuichi Kagawa, Head of Wealth Management, Mizuho Securities (Singapore) (MHSS), said, “In Japan, especially among the UHNWIs, it is still quite nascent as there is not much recognition for sustainability as an investment conviction nor are there many 'good' investable products or solutions available in Japan."
However, he noted that ESG considerations are already a major driver of opportunities for wealth management. “As a leader in sustainable investing, together with Lombard Odier, we could do more in educating investors on the need for sustainability to be a core investment conviction and in bringing more mature strategies to enable clients to zero in on specific themes," Mr. Kagawa added.
The bottom line: Banks have a dual role to play in this sustainability race
At Lombard Odier, we believe that we are in the midst of a Sustainability Revolution where sustainability will be at the core of all investment decisions – one that presents the single-largest investment opportunity today.
Vincent Magnenat, Limited Partner and CEO, Asia, Lombard Odier commented, “Through our conversations with HNWIs in the region, investors still look to banks to help them implement sustainability opportunities within their portfolios. Banks therefore have a dual role to play in this sustainability race – to provide clients with a full suite of sustainable investing opportunities and to guide clients who are not yet fully convinced of the need to align their portfolios.
“As asset and wealth managers, we recognise that it is our fiduciary duty at Lombard Odier to help our clients align their portfolios to mitigate the risks and tap into the opportunities of the Sustainability Revolution. It is our conviction that sustainable investing is the way to generate long-term returns and grow our clients' prosperity for the long term."
Find out more about our CLIC® Economy
1 A unique model in Asia, Lombard Odier's Strategic Alliance Ecosystem brings the bank's investment and family services expertise together with that of the leading local financial institutions in the region to holistically serve the wealth management requirements of entrepreneurs and families. Clients are offered a tailored level of excellence to satisfy both their local and international private banking and investment needs.
2 “CLIC®" Mobility: A climate Transition for Transport in a post-COVID world
3 Singapore, Hong Kong, Japan, Thailand, Philippines, Australia, Taiwan, Indonesia.
Important information
This document is issued by Bank Lombard Odier & Co Ltd or an entity of the Group (hereinafter “Lombard Odier”). It is not intended for distribution, publication, or use in any jurisdiction where such distribution, publication, or use would be unlawful, nor is it aimed at any person or entity to whom it would be unlawful to address such a document. This document was not prepared by the Financial Research Department of Lombard Odier.
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