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The Sustainability Revolution is here in Asia
Article published in The Business Times on 25 August 2021
When Covid-19 exploded onto the world stage in 2020, there were momentary concerns that the approach towards sustainability, which was on an uptrend, would take a backseat to other issues impacted by the pandemic.
On the contrary, it became increasingly clear that Covid-19 had accelerated the demand for sustainable investing globally, including Asia.
Finding common ground among investors
In a 2020 study conducted by Lombard Odier and some of its strategic alliances in Asia, which polled more than 150 Ultra High Net-Worth Individuals (UHNWI) in Asia1, an overwhelming 89% of respondents responded that sustainability is no longer a trend and is here to stay. 61% of these UHNW respondents also noted that they take sustainability into account when making investment decisions.
Climate change featured as a key concern, alongside other issues such as incorporating sustainability into business strategy and corporate values, and the types of investments available – including ESG investing.
This interest in sustainability was also reflected in financial data. Morningstar reported that ESG assets in the Asia ex-Japan region amounted to $25.4bn at the end of 2020, a 131% increase over the past 12 months.
In our conversations with investors, the next generation, in particular, were clear and articulated that sustainability was a key interest for them. For this segment of investors, sustainable investing is becoming increasingly important, and a number of them expressed that convictions such as a focus on sustainability will be a deciding factor in their choice of relationships with financial institutions.
More needs to be done
However, our study reflected that interest wanes when it comes to the belief of superior returns when taking sustainability into account, with 46% of the participants voicing their skepticism and stated their belief that sustainability will not generate superior returns. 56% of the participants who noted that they had not yet actively increased the proportion of sustainability factors in their portfolios are still unsure or do not plan to do so in the foreseeable future.
It is clear therefore, that wealth managers need to engage their clients more on the theme. Wealth managers are in a position to guide investors through this uncertain landscape; to cut through the noise regarding the types of investments available, corporate disclosures and materiality.
More needs to be done; and needs to be done urgently. Currently, the global economy is on a trajectory that would result in an almost 3 degrees Celsius global temperature increase over pre-industrial levels. This is a very significant overshoot, even from the less ambitious end of the Paris agreement at 2 degrees Celsius; it is also double the temperature we are aiming for in the race to net zero i.e. 1.5 degrees Celsius.
Many Asian countries face a double challenge as they may be disadvantaged in their transition options and yet will be disproportionally affected by the physical manifestations of climate change.
Indeed, the current prevailing economic model has a severe negative impact on our natural environment and the gains from economic growth are unequally distributed.
Transitioning to a circular, lean, inclusive and clean model
At Lombard Odier, we believe The Sustainability Revolution represents the single-largest investment opportunity of our lifetime. Amidst the current prevailing global crisis, there is greater urgency for the world to undergo a fundamental rethink of the way we live, produce and act, and to redesign our economic model to one more sustainable and regenerative.
The goal is for the global economy to transition to a model that is Circular, Lean, Inclusive and Clean – what we call the CLICTM economy. In fact, this transition is already underway across many regions in Asia.
For instance, Seoul has focused on circularity for many years. It employed a Volume-Based Fee System (VBFS) for household waste since implemented in 1995, which relies on automated smart bins, trucks and disposal stations that weigh household waste and allocate charges and has driven a significant reduction in waste.
Earlier in April, China had launched the Future Internet Technology Infrastructure, its national internet test facility backbone network, which will be significant for the development of next-generation technologies like artificial intelligence, 5G and autonomous driving.
The launch of Singapore’s new carbon exchange and marketplace, Climate Impact X, is also an exciting step and the direction of their vision of becoming a leading carbon trading and climate finance hub.
Working together with our Strategic Alliances in the region
At Lombard Odier, we have built a series of strategic alliances with local financial institutions in the region, including Kasikornbank Private Banking in Thailand, Indonesia’s Mandiri Private, Mizuho Securities (Singapore), Taipei Fubon Bank, and UnionBank Private Banking in the Philippines.
Through our strategic alliances model, we partner with these financial institutions on the subject of sustainability. We share our thinking and our conviction on sustainability with them; collaborate on knowledge sharing through events in Asia; and engage with them to provide opportunities for their clients in their local markets to invest globally in strategies that focus on sustainability issues such as the climate transition or protecting the world’s natural capital.
As a family business with a long and outstanding track record in the wealth management space, we hold a long-term perspective in everything we do, and have sustainability at the very heart of Lombard Odier. In this regard, we are glad that many of our strategic alliances in Asia resonate with us, that they are also convinced and committed to sustainability, and eager to engage their clients on this issue.
Looking Ahead in Asia – Rethinking Sustainability
The climate transition offers a USD 5.5 trillion annual investment opportunity this decade. As investors, we are convinced that this transition will have a major impact on the business world. It will create a wide range of investment risks and opportunities, and it is our duty at Lombard Odier to manage these risks for our clients and take advantage of these opportunities.
1 https://www.lombardodier.com/home/private-clients/local-solutions/decoding-the-new-dynamics-of-asi.html
