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MAS encourages managers to launch ESG funds

As of the end of March, Singapore accounted for only $6m of the nearly $8bn AUM of the sustainable universe in Asia ex-Japan.
Solar panels fields on the green hills

Asset managers operating in Singapore should consider launching more ESG and sustainable funds as demand for such products is gaining traction, according to Jacqueline Loh, deputy managing director at the Monetary Authority of Singapore.

“Asset managers should seize this opportunity to launch robust green and sustainable focused fund strategies, in anticipation of rising demand from investors in a post-Covid-19 world,” Loh said in a keynote speech during the Asian Venture Philanthropy Network Virtual Conference in Singapore.

Loh said that despite a weakening in global market conditions, sustainable mutual funds globally registered net inflows of $40bn during the first quarter, which is 40% higher compared with the same period last year.

Loh added that ESG products have generally outperformed their peers. Since the onset of the pandemic, 24 out of 26 Morningstar sustainable index funds outperformed their conventional counterparts.

“The momentum will likely persist, with early indications that corporates with good ESG ratings are exposed to less systemic risks and are more resilient to shocks,” she said.

Is Singapore lagging?

Like their global peers, Asia-based investors have poured money into sustainable products. During the first quarter, locally-domiciled sustainable funds in Asia (ex-Japan) had net inflows of $900m, according to a recent report published by Morningstar.

However, data suggests that Singapore is still lagging its peers in Asia. Out of the nearly $8bn AUM of locally-domiciled sustainable funds in the region, Singapore only had $6m, the report said.

But Morningstar believes that the figures are not representative of the growing investor interest in ESG in Singapore.

“Asian investors tend to invest in ESG not just via Asia-domiciled funds, but also Ucits funds especially for those in markets such sa Hong Kong, Singapore and Taiwan,” Wing Chan, Morningstar’s director of manager research for Emea and Asia, said.

However, given that investors in Singapore invest in European Ucits funds, the report acknowledged that it is difficult to determine how much money they hold in sustainable investments.

Part of the Mark Allen Group.