ENVIRONMENTAL and socially responsible investing (SRI) is no longer a 'niche' thing – and the interest and level of environmentally-friendly investment in Asia is gathering pace.
According to the Merrill Lynch Cap Gemini World Wealth Report 2007, SRIs are no longer niche categories as high net worth investors become more aware of social and environmental concerns.
Indeed, stocks that focus on alternative energy sources – such as wind, hydro and solar power – have outperformed the MSCI by almost 20 per cent in recent times.
And globally, SRI assets under management topped US$2.29 trillion in 2005, while socially screened separate accounts increased 10-fold since 1995, reaching US$1.5 trillion in 2005.
Dutch bank ABN Amro polled 300 clients across Asia last year and found them largely receptive to green financial products related to climate change and global warming.
Other institutions have told G+ that since Al Gore's Inconvenient Truth, more investors have begun looking carefully at their portfolios and the environmental records of the companies in which they hold stock.
According to ABN Amro, eight in 10 respondents to its survey considered investing in green investment products, while four in 10 indicated they would set aside five to 10 per cent of their portfolio to green investment products.
Rosita Shivacheva, senior investment specialist at Fortis Investments, says there are clear signs from investors in specialty products such as SRI funds.Funds with global themes and more innovative product structures have continued to gain market share.
Climate change and the urgent need to develop alternative energy sources away from fossil fuels have sparked an interest in a diverse range of industries.
There are clear signs investors are considering companies in alternative energy sources, such as wind and solar power, as well as biofuels. And high net worth investors in Asia are also recognising that social responsibility and investment returns need not be mutually exclusive.
Right now the number of SRI stocks remains limited, but this will change in conjunction with the growing awareness of the potential risks of environmental issues.
The challenge in Asia is the lack of transparency by Asian corporations on environmental, social and governance issues, despite more stringent enforcement trends and greater consumer oversight, according to Ms Shivacheva.
She told AsiaOne: “This issue has become particularly prominent in the last few years due to the trend of European/US companies outsourcing manufacturing to increasingly complex global supply chains.”
But, she adds, Chinese corporations in certain sectors are beginning to show a willingness to disclose and engage in environmental, social and governance-related issues. Investors, as a result, are starting to gain access to more direct ESG-related matrix.
Asian governments also, she says, are beginning to understand that environmental problems will undermine economic growth.
China, for instance, has raised its budget for environmental protection by 31 per cent to US$14.47 billion this year.
The task for sustainable asset managers like Fortis, ABN Amro and Citi Global Wealth management, for instance, is to make sure investors' capital is allocated to innovative Asian companies that will become winners as the demand for products and solutions in the environmental areas like renewable energy, water and waste management increase, and which profit in the long term from increased spending on environment and infrastructure in the region.
