Two-thirds (66%) of respondents believe the pandemic will increase the embracing of ESG investments, and only 4% thought ESG adoption would slow down, according to a survey conducted by the Investment Management Association of Singapore (IMAS) and sponsored by BNP Paribas Securities Services.
Equities were by far considered the asset class that would attract the most ESG-related flows, receiving 76% of votes, followed by multi-asset (12%) and alternatives (8%), with fixed income a minority interest (4%).
The IMAS Special Mid-Year Investment Managers’ Outlook Survey 2020 was conducted in June 2020 and gathered responses from 50 respondents who are mainly CEOs and CIOs of fund management companies based in Singapore.
“Before Covid-19 hit, we were already seeing strong sentiments about the adoption of ESG investments among our member firms. The latest survey results put to bed that the adoption of ESG investments was a bull-market phenomenon,” said Rajeev De Mello, chair of the IMAS development committee, in a statement.
IMAS has been promoting the embrace of ESG-principled investments, for instance working with the MAS to create the proposed “Guidelines on Environmental Risk Management for Asset Managers”, which was recently launched for public consultation.
Other key findings from the survey include that lockdowns and re-openings (42%) topped the list of drivers for financial markets that have become more relevant during the pandemic.
Most respondents recognised the importance of technology to cope with future health crises, with 68% saying they planned to adopt more technology to ensure flexibility.
Moreover, half of the respondents said they will offer most employees the option to work from home when they want, even when telecommuting is no longer mandated or prescribed by the government. The lack of social interaction as a result of telecommuting, however, was a concern for 34% of respondents.
Yet, the majority of respondents believe that they are back to business as usual or will be by the end of the year, although 12% reckon that it will be at least another 12 months before they return to normal.
The major threat to the Singapore asset management industry includes a delay to the development of a Covid-19 vaccine (27%) due to its impact on consumer and business confidence, trade and travel, according to the survey.
ESG products
Among investing strategies (irrespective of ESG credentials) that are favoured in 2021, active equity (19%) was the most popular, and although 42% of respondents believe that demand for passive equity vehicles will increase over the next decade, only 8% thought they would garner much popularity in 2021.
The views on the relative performance of Asian equities and fixed income markets were similar, with 44% expecting both to outperform their global peers as economies recover, and 22% and 24% respectively reckoning that they will provide a cushion in falling markets.
However, the apparent lack of enthusiasm for ESG fixed income products is perhaps surprising. This month, JP Morgan Asset Management and Manulife Investment Management both filed applications with the Monetary Authority of Singapore (MAS) to launch sustainable bond funds in the Lion City.
Besides the two sustainable bond funds, ESG-guided funds planned for Singapore this year include the (Natixis affiliate) Mirova Global Sustainable Equity Fund, the Schroder ISF Sustainable Multi-Asset Income Fund and the Fidelity Sustainable Water and Waste Fund.
Indeed, ESG was “ranked the leading future driver of investment growth in the next three years, based on the IMAS 2020 Annual Survey released in January this year,” according to Mello.
Yet, data suggests that Singapore is still lagging its peers in Asia. A recent Morningstar report found that out of the nearly $8bn AUM of locally-domiciled sustainable funds in the region at the end of March, Singapore only had $6m.
In June, Jacqueline Loh, deputy managing director at the MAS, urged asset managers operating in Singapore to launching more ESG and sustainable funds.
“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,” she said in a keynote speech during the Asian Venture Philanthropy Network Virtual Conference in Singapore.
