Asian investors growing increasingly sceptical of ESG funds amid lack of clarity, AXA study shows
- Growing scepticism and a lack of trust in the performance of ESG investments are the ‘top barrier’ for Asian investors: AXA Investment Managers
- Only a third of investors in Asia with ESG funds in their portfolio are fully aware of the aims and objectives of those funds
There is growing scepticism and loss of trust in the performance of environmental, social and governance (ESG) investments among Asian investors, according to a study by AXA Investment Managers.
Doubts around the performance of ESG investments rose to 35 per cent in Asia last year from 27 per cent in 2021, making it the “top barrier”, the study released on Tuesday by the global investment firm showed.
“Specifically, there is a lack of clarity over ESG funds being genuinely more sustainable,” the study said. “Across Asia, investor awareness and understanding of their ESG product holdings are on the decline.”
The findings were based on a survey by consulting firm Cicero in October last year of 12,000 consumers aged 18 to 55 across 12 European and Asian markets.
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The proportion of individuals in Asia who expected ESG funds to outperform non-ESG funds of the same risk level fell 10 percentage points to 41 per cent in 2023 from 2021.
Only a third of investors in Asia with ESG funds in their portfolio are fully aware of the ESG aims and objectives of those funds, the study showed, while the level of awareness had fallen 6 percentage points to 33 per cent in the same period.
Even investors who had had a conversation with their financial adviser about ESG or responsible investment did not display any significant improvement in understanding, with only 28 per cent feeling fully aware of their ESG fund characteristics.
“Strengthening trust and confidence in ESG assets will prove challenging unless investors acquire a deeper comprehension of the diverse ESG products and solutions, their specific goals, and an understanding of the underlying mechanisms,” said Jane Wadia, head of sustainability at AXA Investment Managers.
AXA Group recently began offering training to its shareholders and insurance customers in France on the challenges of climate change, including investment topics, explaining the impact of climate change on the environment and businesses and what can be done to reduce the consequences at both individual and corporate levels.
Investors surveyed also said they would like to see improved product transparency, though a longer track record and a wider choice would help to increase the attractiveness of responsible and ethical investment in Asia, according to the study.
Despite the poor sentiment, ESG ownership is wider in Asia than in Europe, the study found.
In Asia, 39 per cent of investors said there were funds in their portfolio that can be categorised specifically as ethical or ESG funds, while it was less than a quarter for investors in Europe.
Japan and Singapore had the highest proportion of investors who were the least likely to expect an ESG fund to outperform the market.
Hong Kong continues to lag behind the rest of the region, with only 29 per cent of investors holding ESG funds, behind Japan, despite a slight increase from 2021.
Meanwhile, climate change has become a central or a significant part of the investment policy for 80 per cent of investors in the Asia-Pacific region, surpassing Europe for the first time, according to another annual survey published on Tuesday by international asset manager Robeco.
However, among the 300 investors surveyed, investment enthusiasm continued to fall in North America, with only 35 per cent prioritising climate investing, amid “political wrangling over the perceived cost of integrating ESG factors into investments”, the report said.
