Demand from millennials is set to drive sustainable, responsible and impact (SRI) assets under management to as much as $400 billion by 2020, according to Standard Chartered Private Bank forecasts.
To meet this demand, StanChart onboarded three funds related to the environmental, social and governance (ESG) theme last year for clients in China, Taiwan and Singapore. It plans to introduce one of the funds in Hong Kong at the end of the first quarter of this year.
Currently, a third of investment volumes come from private banking clients, with the rest from Priority Banking.
‘We’ve also had strong success in driving awareness of our ESG capabilities on social media,’ said StanChart’s Eugenia Koh, who is director, strategic engagements and impact investing, at the private banking and wealth management unit. ‘For instance, our wealth management team in China arranged a live streaming information session around ESG funds last year which attracted close to 100,000 viewers.’
Koh dismisses the commonly held view that ESG can involve a trade-off between financial returns and social impact. A quick look at ESG/SRI funds available in private banks show return patterns that are no different from their traditional counterparts.
On a one-year annualised basis, both the BSF Impact World Equity fund and PARVEST Aqua fund have outperformed their benchmarks, she said.
BlackRock’s BSF Impact World Equity Class returned 24.17% in 2017 versus the MSCI World Net TR Index, which returned 22.40%. Launched in August 2015, the fund invests in equity securities with a ‘measurable positive societal impact’ and has Apple, Alphabet and Amazon as its top three holdings.
Meanwhile, the PARVEST Aqua fund outperformed its benchmark MSCI World NR by 141 basis points on a three-year annualised basis in euro terms, according to its January factsheet. The fund invests in ‘anything that touches water – cleaning it up, supplying it, making usage more efficient to reduce consumption, as well as the technology bit’, said David Li, senior portfolio manager at BNP Paribas Asset Management.
At 9.23%, the third fund on StanChart’s platform – the Allianz Global Sustainability fund – slightly underperformed its benchmark Dow Jones Sustainability World Index (Total Return) (Net) on a three-year basis in euros by end-December 2017. ‘However, if we were to benchmark its performance against the MSCI World TR, it would have also shown outperformance,’ Koh added.
DBS Private Bank recently onboarded the PARVEST Global Environment fund, which gave returns of 9.97% on a three-year annualised basis versus the MSCI World NR’s 9.56% when calculated in December 2017.
However, two other BNP Paribas funds offered to private banks in Asia haven’t performed as well. The PARVEST Smart Food fund, launched in April 2015, has underperformed the MSCI AC World NR by two percentage points to return 6.75% in annualised one-year terms.
The PARVEST Climate Impact fund has mostly underperformed the index, winning 8.98% for investors on an annualised three-year basis in euros. The benchmark MSCI World Small Cap NR index returned 9.62% in the same period.
‘I’ve been with impact investing since 2010-11 and there’s a lot more interest from private banks in the last couple of years,’ Li said. ‘It’s still a minority, but it’s moving in a positive direction. Five years ago, it was nobody.’
RobecoSAM, the investment specialist focused on sustainability investing, also offers some funds to professional investors in Asia through private banks.
The RobecoSAM Sustainable Healthy Living fund, which invests worldwide in companies which provide technology, products and services in the sectors of food, health and physical activities, has returned 17.94% on a three-year basis in euros.
As of 31 January, it was underperforming the benchmark MSCI World ND index, which returned 39.87% in the same period.
The RobecoSAM Smart Energy fund, meanwhile, outperformed its benchmark on a shorter term basis, giving back 42.92% in the past three years versus the MSCI World ND’s 39.87%, as at 31 January.
However, it has underperformed its benchmark substantially since its inception in September 2006. The fund has returned 68.64% versus the benchmark MSCI World ND index’s 103.28% in the past 12 years.
The fund invests in companies providing technology, products and services in the area of future-oriented energy, such as renewable energies, decentralised energy supply and energy efficiency. Its largest sectoral exposure is to information technology, industrials and utilities.
‘100% from impact investing’
Swiss wealth managers operating in Asia are also veering towards more sustainable investment solutions.
During a white paper’s release at the 2018 World Economic Forum, UBS Wealth Management’s James Gifford said: 'Sustainable investing is now at the point, arguably for the first time, where clients can now construct a portfolio that contains 100% sustainable and impact investing strategiesImp and deliver equivalent returns to conventional portfolios.’
This article appeared in the March issue of the Citywire Private Wealth magazine.