Hong Kong retail investors show growing ESG awareness, but actions fall short of intent, Pictet-HKUST survey shows
- While more than half of those surveyed said they plan to invest in ESG products in the next 12 months, only 5 per cent had actually invested in such products
- Net investment flows into ESG funds in Hong Kong nearly doubled to US$40 billion last year, according to Morningstar
Retail investors in Hong Kong are showing an increasing interest in sustainable investing, but they are hampered by a lack of information, tools and confidence in environmental, social and governance (ESG) products, a study found.
Some 75 per cent of those polled said they would allocate 10 to 40 per cent of their total investment into ESG products.
“We are starting to see more demand,” said Freeman Tsang, head of intermediaries for Asia except Japan at Pictet Asset Management. He, however, added that investors were held back by several factors, such as lack of education, types of investment categories and expectation.
Investors were beginning to prioritise values above returns in ESG investment, the survey showed. Over 70 per cent said they would prefer a product that meets ESG standards even if the returns were 2 per cent lower than a non-ESG product.
However, only 5 per cent of those polled had invested in ESG products at the time of the survey.
“One of the major reasons [for the low investment] is because of the lack of information and a misconception of the returns of ESG products,” said Professor Tam Kar-yan, dean of the School of Business and Management at HKUST.
This aligns with other studies conducted last year on Asian retail investors’ understanding and attitude towards sustainable investing.
Sixty per cent of investors across Asia-Pacific said the coronavirus pandemic made them want to invest or save their money more sustainably, but 46 per cent said they did not have the tools or information to start investing sustainably, a survey by Fidelity International last June found.
The survey, which polled nearly 10,000 retail investors across mainland China, Hong Kong, Japan, Singapore and Taiwan, found 42 per cent were sceptical about the lack of accountability on whether companies would achieve their promises made on sustainability impact.
“We expect to see more ESG solutions being developed that address these investment needs, but it will take some time for the public to gain a better understanding of sustainable investing,” said Flora Wang, director of sustainable investing at Fidelity.
Currently, there is no unified standard or index to measure the impact of ESG investments. Various financial agencies have released their own frameworks for ESG impact reporting.
The diversity of standards has translated into investor apprehension, holding retail investors back from devoting more of their investment into ESG products.
A survey by Standard Chartered last year, which polled over 2,000 investors in Asia and the United Kingdom, found that just over half remained apprehensive about sustainable investing, even though there was a 16 per cent decrease in such concern from 2020.
“The inconsistent and patchy nature of data has created apprehension among investors about the actual impact of their investments,” said Marc van der Walle, global head of wealth management at Standard Chartered Bank.
“To increase adoption, investors need more standardised and clearly measurable outcomes.”
