People & Money – Singaporeans & Sustainable Investing

Deborah Ho, Managing Director and Head of Southeast Asia for BlackRock, shares how Singaporeans are thinking about sustainable investing.

The COVID-19 pandemic brought tremendous disruption to global economy this year and some of the largest market swings in over a decade. It has cast a spotlight on sustainability-related issues within companies, and we also saw better risk-adjusted performance from sustainable investments globally.  Outside of Asia, we saw record inflows into sustainable investment strategies in the first quarter of 2020.¹

What is sustainable investing?

Sustainable investing can mean different things to different people. We at BlackRock define sustainable investing as combining traditional investing with material environmental, social, and governance-related (ESG) insights to improve long-term outcomes for our clients.

We believe that companies managed with a focus on sustainability tend to be better positioned and more resilient than their less sustainable peers to weather adverse conditions while still benefiting from positive market environments.

Singaporeans want their investments to make a difference

Albeit a relatively new concept to Singaporeans, we believe sustainable investing is set to gain favour as its awareness grows. We found that only 43% of Singaporeans are familiar with the term sustainable investing².  Once informed on the definition, 69% find sustainable investing appealing. In fact, 80% of the interviewed Singaporeans feel it is important for their investments to make a positive impact.

Among a variety of sustainability subjects, 92% of Singaporeans feel climate change is an important issue to them. Specifically, in the context of E, S and G, 88% of the surveyed indicate environmental issues as their top concern.

When it comes to their own money, 82% of Singaporean investors are willing to switch to sustainable options provided all things are kept equal, such as fees and return on investment. Half of them would even pay additional fees for sustainable investing options.

Common misconceptions on sustainable investing

However, due to a lack of awareness of sustainable investing, misconceptions remain a barrier especially among Singaporean investors. Here’s what we found:

• 75% don’t know how sustainability is measured;
• 63% think sustainable investing carries higher costs;
• 56% believe it means sacrificing returns compared to non-sustainable options;
• 54% think sustainable investing carries higher risks.

Majority of Singaporean investors believe shifting from traditional investment to sustainable solutions would mean a tradeoff in returns, but evidence appears to tell otherwise. According to a Morningstar report, 51 out of 57 of their sustainable indices outperformed their broad market counterparts in the first quarter of 2020³. Our analysis of ESG indices and ESG-managed funds versus their non-sustainable peers arrived at similar results.

How do we explain the resilience? Our research has established a correlation between sustainability and traditional factors such as quality and low volatility, which themselves indicate resilience. However, traditional factors, do not fully explain all the attributes that can impact a company’s resilience. In the current crisis, companies with a record of good customer relations or robust corporate culture are demonstrating resilient financial performance. The outperformance of these sustainable funds has been driven by a range of material sustainability characteristics, including job satisfaction of employees, the strength of customer relations, or the effectiveness of the company’s board. We particularly see this trend.

Importantly, resilience of sustainable assets lies beyond divesting from thermal coal companies. We also found that companies with better sustainability characteristics within the energy sector and its sub-sectors are more likely to outperform their peers with weak sustainability characteristics.

Think long-term. Act now

Businesses that are integrating sustainability as part of their strategy tend to have better engagement with their customer bases and employees. They generally exhibit higher resilience during market downturn, and are more likely to outperform their peers in the long run. Investing in such companies would allow you to gain both sustainability and financial goals without compromising on your return on investment.

If you’re evaluating your portfolio in this climate, consider making a positive impact from investments by integrating sustainable strategies in your portfolio. From equity to multi-asset funds, we have a range of sustainable solutions for investors to consider, depending on their investment goals.

We believe that we are still in the early stages of a long-term shift towards sustainable investing and this is a transformation that we expect to see persist beyond the pandemic, recovery and long after.