It’s Time and not Income That Count When It Comes to Sustainable Investing

It is not how much you make, but how old you are that determines your appetite for sustainable investing, according to a survey by the Hong Kong Investment Funds Association released on Sunday. Nearly a fifth of Hong Kong respondents aged between 18 and 29 said they would definitely buy green investment products – funds, bonds or stocks – that will deliver a positive impact on the environment and society, against only 10 per cent for those between 45 and 55 years old, the survey found. But in Guangdong, the bigger interest came from older investors – 31 per cent from the 45 to 55 year-old group, compared with 21 per cent of respondents aged between 18 to 29. The survey interviewed 1,026 investors in Hong Kong, and Guangzhou, Shenzhen and Zhuhai cities in the southern Guangdong province in the third quarter of last year.

sustainable investing

Higher income earners in both Hong Kong and Guangdong generally have a greater interest in green investing. In Hong Kong, 29 per cent of investors who earned HK$100,000 or more a month said they would invest in green products, versus none from the HK$10,000 income bracket. While the trend was similar in Guangzhou, Shenzhen and Zhuhai for the higher income group, where 60 per cent of respondents were keen, a notable 32 per cent of respondents who earned a modest HK$10,000 had also expressed interest. Still, real retail investor interests, according to the survey findings, are only as much as 1 per cent of the respondents, who said they had bought green products. “The most common reasons cited by Hong Kong investors are a lack of understanding on what environmental, social and governance (ESG) products are invested in, and their potential returns,” said Sally Wong, chief executive of the HKIFA.

Guangdong investors believed that returns would be lower than the conventional investment products, Wong said. Half of the investors in both markets could not see a clear relationship between sustainable investing and returns. Demand from investors drives shift towards sustainable business in Asia
That said, there is no shortage of studies from financial institutions in recent years to quantify such returns. UBS’ global wealth management’s head of impact investing and chief investment officer James Gifford.

He said studies showed that 92 per cent of investment portfolios with a sustainable investment concept delivered better returns than one without, while only 8 per cent of them had underperformed. The companies which pay attention to social responsibilities and environmental impact are usually the ones with better management James Gifford, UBS. The MSCI Emerging Markets ESG Leaders Index, which tracks the performance of listed companies with high scores for their focus on ESG in 24 emerging markets, reported a 11.03 per cent annualised return in the three years ending in December, higher than the 9.65 per cent generated by the MSCI Emerging Markets Index during the same period. For a 10-year basis, the former posted a return of 11.72 per cent compared with the latter’s 8.39 per cent. “The companies which pay attention to social responsibilities and environmental impact are usually the ones with better management,” Gifford said.

In September, the Securities and Futures Commission issued “Strategic Framework for Green Finance” to push for greater green investment in Hong Kong. Most Hong Kong firms fall short in ESG disclosures despite progress made, says BDO Jeffrey Chan Lap-tak, the founding partner of investment firm Oriental Patron Financial Group, said while companies involved in green businesses could benefit from tax incentives that governments in China and the West have introduced to deliver good returns, investors still needed to be wary of the risks tied to sustainable investing. “We have found that some of these firms do not have a good business model and their profit is mainly supported by government subsidies. They would be hard hit once the government withdrew the support,” he said.