Singapore ESG flows turn positive

This is a reduced version of The Business Times’ ESG Insights newsletter. Sign up here to get the complete version in your inbox every week.

??This week: Singapore investors may finally be getting into sustainable investing, after years of holding back.

Flows into sustainable funds in Singapore turned positive in 2022 after consistent outflows in the previous two years, according to data by Morningstar.

Singapore investors deployed more capital into sustainable funds than they withdrew in each of the first three quarters of 2022, resulting in a total inflow of US$54.3 million for the first nine months of the year. That was a sharp turnaround from outflows of US$0.3 million in the corresponding period in 2021 and US$0.4 million in the same period of 2020. In fact, sustainable funds saw net outflows for at least nine straight quarters before 2022.

It’s hard to pin down what might have changed in 2022, but investors’ concerns about greenwashing and returns may have had a role to play.

Standard Chartered has been carrying out surveys of affluent and high-net-worth investors over the past few years about attitudes and decisions regarding sustainable investments. In 2021, Singapore ranked the lowest among seven surveyed markets when participants were asked if they knew what sustainable investing is, how interested they were in sustainable investing, and if they had made sustainable investments.

The survey report suggested Singapore investors were more concerned than the rest of the world about “a lack of supporting evidence on both the social and financial benefits” of sustainable investment solutions. For instance, 61 per cent of respondents in Singapore said social impact was difficult to measure – compared with 52 per cent across all surveyed markets.

In the 2022 edition of the survey, Singapore investors cited perceived lower returns or higher risks, comparability and comprehensibility as the key barriers to sustainable investing. However, 37 per cent of respondents indicated they would consider having more than 15 per cent of their portfolios in sustainable investment assets in the next two to three years.

The Singapore turnaround is encouraging, but it’s helpful to take that in perspective. Participation in sustainable investing still lags the rest of Asia and the world, especially with the retail crowd. Addressing investors’ concerns about returns, risks, comparability and comprehensibility could help.

?? Top ESG reads:

1. Lim Tuang Liang has become Singapore’s first government chief sustainability officer, moving from his previous appointment as chief science and technology officer. His job? Drive the nation’s green plan.
2. India launched a 174.9-billion-rupee (S$2.8 billion) incentive plan to promote green hydrogen, hoping to capture a 10 per cent share of global demand.
3. Hong Kong sold US$5.8 billion of green bonds in a multi-tranche deal, with the offshore yuan notes pricing about 50 basis points tighter than price talk.
4. Some builders are turning to ancient earth compacting techniques to avoid concrete’s carbon emissions.
5. What’s the best way to help social causes? Perhaps we should be spending a lot more money on improving data in the social sector.

What do you think about today’s newsletter? Let us know at [email protected] . Sign up for the full version here .