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Hong Kong sustainable investors driven by returns

But jury's still out on whether sustainable funds outperform their traditional counterpart.
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Hong Kong investors in sustainable funds are mainly attracted by their financial returns, a Schroders study has found.

In an Asia-focused snapshot from its 2022 Global Investor Study published earlier this year, the firm found 54% of investors in Hong Kong said the types of sustainable funds they would most like to invest in are ones that focus on financial returns while integrating sustainability factors.

This was slightly below the 61% of investors in Asia overall that prioritised financial returns in sustainable funds, while the figures for the Americas and Europe were 60% and 51% respectively.

Schroders canvassed the opinions of 23,000 investors globally including 500 from Hong Kong for its survey.

Can sustainable funds outperform?

Despite returns being the main appeal of sustainable funds, the study found only 36% of investors globally believed these are more likely than traditional funds to offer higher returns, dropping from 42% in 2020.

Last year, ESG Clarity UK/EU reported Peter Michaelis, head of sustainable investment at Liontrust, said “performance is critical for the success of sustainable investment”.

“That has to be the core proposition of sustainable investing, to build a strong investment return by investing in sustainable companies. And you then demonstrate as much as you can, the positive aspects of those businesses you are investing in,” he said.

In Hong Kong, investors appear to agree, according to the Schroders study. Almost three in four self-identified ‘expert/advanced’ in investment knowledge said sustainable investing is key to driving long-term returns, dropping to 45% of intermediate investors and 65% of beginner investors.

The results are similar globally, where more experienced investors responded that they are more confident that sustainability investing can drive both changes and financial returns compared with less experienced investors.

However, not everyone thinks the same. Also last year, Francois Zagamé, head of impact solutions and research, at Hilbert Investment Solutions, told ESG Clarity UK/EU it makes sense that “companies with sustainable business practices are likely to outperform in the long term, but in reality, we don’t yet know enough”.

He added: “The search for reliable evidence around the link between ESG factors and performance continues, but for every study that shows a positive correlation, another raises doubts.”

This story first appeared on our sister publication, ESG Clarity.

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