Asia-Pacific’s richest investors now see sustainability as a bona fide investment opportunity, but the lack of quality investment opportunities and a generation gap remain barriers to increasing sustainable investments, according to a new study by global wealth and asset manager Lombard Odier.
High net worth individuals in Thailand and Taiwan lead the region in channelling funds towards sustainable investments, with almost all respondents from both countries saying they invest in sustainable assets and roughly a third holding more than 40 per cent of sustainable assets in their portfolios, according to Lombard Odier’s 2022 HNW Individuals Study.
Now in its third consecutive year, the study includes responses from over 450 high net worth individuals in eight countries, namely Singapore, Hong Kong, Australia, Japan, Thailand, the Philippines, Indonesia and Taiwan.
“There is an increased conviction that sustainability will deliver superior returns, with a change of emphasis from value-driven investments to a genuine anticipation of returns,” Lombard Odier said in a statement today.
However, not all APAC markets witnessed the same trend: Australian high net worth investors for instance were the least interested in sustainable investing, with more than 30 per cent showing no interest in investing sustainably, the study showed.
High net worth individuals in Thailand (93 per cent) and Taiwan (88 per cent) were the most interested among APAC countries in sustainable investing, according to Lombard Odier’s 2022 HNW Individuals (HNWIs) Study. Image: Lombard Odier
“When asked for the reasons for not being active, (respondents) said they lacked an understanding of the risks and returns, followed by concerns of greenwashing,” Lombard Odier said.
“Risk assessment has become increasingly important – now that investors see sustainability as a driver of returns, they want to understand the risk, and how such investments will (out)perform in the short, medium and long term,” the company added.
Different APAC markets, however, experienced different barriers to sustainable investing. In Australia, for instance, only 19 per cent of respondent said that they understood what sustainability is, but 64 per cent were hindered by a lack of quality investment opportunities. However, Thailand’s investors said that they needed more education, with 46 per cent of respondents not understanding sustainability well enough.
It is therefore important for banks understand and navigate differing attitudes in different markets, Lombard Odier said. The study found a direct correlation between the level of sustainable investment services given by banks to the weight of sustainable investments in a high net worth individual’s portfolio.
“Banks need to play a nuanced role and adapt their approach from one country to another, while also helping to facilitate communication and fill the gaps between generations,” Lombard Odier said.
Clear age gap in attitudes towards sustainable investing
The study also found a clear age gap between investors when it came to interest in sustainable investing, with 80 per cent of investors below the age of 34 being interested compared to less than 60 per cent of those over the age of 70.
The older generation are less interested in sustainable investments compared to their younger counterparts, providing a challenge to banks in terms of tailoring their advice for different groups with different agendas. Image: Lombard Odier
“APAC’s high net worth individuals say they face numerous barriers to convincing their families about sustainability, including relative underperformance of financial returns (41 per cent) and a lack of investment opportunities with proven track records (36 per cent),” Lombard Odier said.
In Singapore, the study found that more than 30 per cent of high net worth individuals and family members did not understand what sustainability is.
“That might explain why 23 per cent of Singapore high net worth individuals do not hold sustainable investments at all compared to an APAC average of 17 per cent,” Lombard Odier said.
Singapore was also the only market polled where the main motivation for sustainable investing among high net worth individuals is values-driven. At the same time, their expectations of superior returns and willingness to act with the help of their banks were lower than the APAC average.
Singapore’s high net worth individuals are less willing to act on sustainable investing with the help of their banks compared to their Asia Pacific counterparts. Image: Lombard Odier
“It is an interesting paradox, even more so considering our study also shows that they have lower beliefs than the APAC average in having to compromise on returns when investing in sustainable investments,” the report said.
It added that Singaporean high net worth individuals however were more worried by a lack of quality investment opportunities with a proven track record.
“The important message from this is that sustainability is being taken seriously by Singapore high net worth individuals as an investment opportunity. However, the opportunity will only be realised if banks proactively reach, engage, educate and clarify, with a clear definition of what sustainability is,” the report said.
