Schroders creates long-term value through sustainable investing, commitment to people and the planet
- Looking beyond profit, Schroders is also committed to investing responsibly while making a positive impact on society and the environment
Country Business Reports interviews and articles by Discovery Reports
The hastened shift from purely financially driven to values-based investing is perhaps one of the lasting outcomes of Covid-19. Though sustainable investing traces its beginnings to the 1800s, at no time has environmental, social and governance (ESG) criteria taken more prominence than now. Global sustainable fund flows reached US$70 billion last year from only US$5 billion in 2018, according to Morningstar. Bloomberg pegs the value of ESG assets at US$37.8 trillion as of last year, which is projected to reach US$53 trillion by 2025.
This comes as no surprise to Schroder Investment Management (Hong Kong) – investing with conviction is in its DNA, having originated from mid-19th century London where Schroders continues to be among the 100 largest listed companies. By continually validating market opportunities and pursuing them at the right time, the firm aims to deliver investment returns to its clients while making a positive impact on society and the environment.
“We see ourselves as an investor, but we look beyond profit,” said Amy Cho, CEO, Hong Kong, and deputy head for Asia-Pacific at Schroders. “When we look at the assets of our clients, besides looking after risk and return, we also place much emphasis on the third dimension, which is impact. Only by considering these three pillars together can we uncover a company’s real investment potential.”
Increasing attention on sustainable investing
Results of the Schroders Institutional Investor Study 2022 show an increasing preference for sustainable investing in Asia-Pacific. Almost 72 per cent of respondents from the region have embraced the concept of full ESG integration into the investment process, identifying this as one of the top three endorsed approaches to sustainable investing.
“Sustainable investing makes sense both from the investment perspective and also from a social perspective,” Cho said. “In order to make an impact, we look carefully and very seriously at the way that we direct capital, not only towards shaping the financial returns that we achieve but also the type of impact that we could create upon the world.”
Evolving with the market as always, Schroders integrated ESG into decision-making across investment teams globally in 2020. Through year-round dialogue with the companies it invests in, the group gains a thorough understanding of their corporate values, scope of operations and innate capabilities. Active dialogues and engagement also help the asset management firm determine a company’s resilience to an ever-changing landscape.
Having appointed its first governance resource in 1998, Schroders has recorded and monitored the group’s worldwide ESG engagements for more than two decades. Last year alone, it conducted 2,100 sustainability-focused engagements and voted on some 80,000 shareholder resolutions in more than 7,000 meetings globally.
This is in line with the deepening ties that bind investment returns and sustainable outcomes. It is no longer all about the bottom line but more about how companies manifest their integrity and positive influence in everyday life. Such social costs are no longer external factors to a company’s valuation but rather benchmarks that would determine their weight in the competition for investment inflows and customer loyalty.
“Within Schroders, we have proprietary tools to help us measure impact, such as SustainEx, which seeks to quantify in dollar terms both the positive and negative social impacts that any company can create through the way it operates,” Cho said.
Driving progress and improving futures
Innate to Schroders’ corporate culture is its focus on driving progress and improving futures by acting in the most responsible way possible not only towards its employees but using the group’s influence for the good of the environment and society at large.
“One of our strongest competitive advantages is really our culture,” Cho said. “We are an investor. At the same time, we’re also an employer around the world, so culture is particularly important. We believe in and focus a lot on inclusion and diversity. For us to maintain a sustainable business, it’s important that we can attract people from all walks of life so that a diverse pool of talent can bring different perspectives and work together in managing assets.”
Since 2020, the group has been a signatory to UN Global Compact, the world’s largest corporate sustainability initiative steering companies to align their operations and strategies to sustainable development goals.
Firmwide, Schroders has consciously and proactively reduced energy consumption in its properties and fleet, while capping its overall carbon footprint from operations, business travel and supply chains. Its operational emissions (Scope 1 and 2) decreased by 14 per cent last year compared to the 2019 level, with business travel emissions falling 92 per cent over the same period. In Hong Kong, since 2019, the firm has been buying renewable energy certificates annually in line with Schroders’ goal of achieving 100 per cent renewable energy usage.
Equally important to the group is lending a hand to local communities where the firm operates. One of these companywide initiatives is Schroders Giving, which was launched globally in 2019 to showcase the positive impact the business is having on society at large through strategic partnerships.
Locally, the firm has long supported Chinese YMCA of Hong Kong and the Music Children Foundation, which aims to provide free-of-charge music programmes to schoolchildren in need.
“Our corporate sustainability strategy is built around two pillars: People and Planet. On the people aspect, we look after the interests of our people and the wider community. Meanwhile, we take responsibility for the planet by being transparent about our environmental impact. We keep track of our ecological footprint, such as our resource consumption and the many ways of bringing it to a good balance. Our transition to using 100 per cent renewable energy globally by 2025 is also a top priority,” Cho said.
Continuing a legacy of market and product innovation
Schroders celebrated its 50th anniversary in Hong Kong last year, with its legacy of market and product innovation in the intermediary space coming to fore. Throughout the decades, its innovative products have created long-term asset value for insurance companies, pension schemes, sovereign wealth funds, endowments, foundations and end clients.
As a pioneering provider of guaranteed funds, Schroders launched the first of such investment funds in Hong Kong in 2001. The firm also introduced the city’s first commodity futures and options funds in 2007. Last year, its global multi-asset thematic strategy was launched to the market.
Likewise, Schroders was among the earliest entrants to China’s Qualified Foreign Institutional Investor (QFII) scheme, and promptly obtained a QFII licence and investment quota to invest in the market. It was also an early mover in China’s mutual fund market through the Mutual Recognition of Funds (MRF) scheme. By virtue of the MRF scheme, the firm has expanded the reach of products developed in Hong Kong.
Schroders began providing retirement and surplus fund services in Hong Kong in 1974, and when the Mandatory Provident Fund (MPF) scheme was launched by 2000, the firm had already become an active player in the territory’s pension system. Now, as a leading member of Hong Kong’s Occupational Retirement Schemes Ordinance in the choice scheme service provider category, the firm continues to manage assets for defined benefit and contribution schemes.
As Hong Kong’s provident fund system turns digital, Schroders stays relevant by offering innovative retirement investment solutions together with its MPF partners. A key project driven by the Mandatory Provident Fund Schemes Authority, the eMPF platform development is continuing, with the onboarding of MPF trustees and their respective schemes slated for next year. Hong Kong’s eMPF platform is expected to be fully functional by 2025 at the earliest.
New possibilities for asset and wealth management
Schroders is determined to unlock more opportunities through the Wealth Management Connect (WMC) scheme, which enables the residents of Hong Kong, Macau and nine cities in Guangdong province, including Shenzhen and Guangzhou, to make cross-border investments within the Greater Bay Area (GBA). The Guangdong-Hong Kong-Macau GBA is an emerging international economic powerhouse that could become one of the world’s richest.
“This scheme primarily offers investors within the GBA region the opportunity to access the wealth management services that have always been offered by the banks in Hong Kong to Hong Kong investors,” Cho said. “WMC leads to a diversification of investment opportunities accessible to GBA investors, so it brings robust opportunities not only to the banks but also to the asset managers. We are in a strong position to join forces with our intermediary partners in this area, so we will continue to work very closely together to fulfil the investment needs of investors within the GBA region.”
Schroders is keen on establishing partnerships with virtual banks and digital-only platforms that can cater to the demands of tech-savvy investors in the digital space. Three of the firm’s major growth priorities in Hong Kong over the next five years are sustainability and sustainable investing, developing its private asset business, and migrating its model portfolio services onto digital platforms as part of an overall effort to capture new-generation investors that prefer to manage their wealth on a 24/7 basis.
“We want to continue playing to our strengths as an active asset manager offering a comprehensive suite of investment solutions covering both public and private investing,” Cho said. “We will stay committed to investing responsibly. As we continue to innovate, we will be doing good for our business, our clients and colleagues in Hong Kong, both as an asset manager and a responsible employer for not only the next five years, but for the next 50 years and beyond.”