Seek “good” returns for a better world


We favour ESG funds that are both growth and income-oriented, as part of the barbell strategy.
Chief Investment Office17 May 2019
Photo credit: AFP Photo


What happened?

Global sustainable-investing assets grew 34% to USD30.7t in 2018 from USD22.9t in 2016, according to the latest data by Global Sustainable Investment Alliance (GSIA), published in April 2019 (Figure 1). In Asia, the Global Sustainable Investment Review revealed that there had been a notable 16% increase in sustainable-investment assets between 2014 and 2016. This reaffirms our view that the inflows into sustainable investing is structural.

Investor interest in “responsible investment products” is increasing from institutional investors and wealth management clients globally. These products typically factor in environmental, social, and governance (ESG) measures. The United Nations (UN)-backed Principles for Responsible Investment also show a shift toward the incorporation of ESG factors in investment decision-making.

There is immense growth potential for sustainable investments, both regionally and globally. 66% of global consumers are willing to pay more for a sustainable brand and 73% of Millennials are prepared to pay extra for a sustainable offer, according to studies by Nielsen. In 2017, a DBS research collaboration with the UN Environment Programme (UNEP) found that in the Association of Southeast Asian Nations (ASEAN), there was demand for an estimated USD3t of investment to be pumped into “green investments” from 2016-30.

What does this mean?

We see huge growth opportunities in sustainable investing in Asia ex-Japan, driven by: i) the currently low penetration of sustainable investing; and ii) the Millennial wave. Assets managed under responsible-investment strategies remain extremely low in Asia ex-Japan, at only 0.8% of total assets under management (AUM) in 2016 compared to 53% in Europe, according to GSIA (Figure 2). Indeed, investors in Asia ex-Japan have not caught up in a big way, compared to the rest of the world. Further, over USD30t of wealth will be transferred from Baby Boomers to 90m Millennials over the next few decades. In Asia, about 35% of wealth will be in the hands of Millennials over the next five to seven years, resulting in the highest rate of change in any region. According to several global surveys, Millennials are keen on sustainable investing. In fact, investors from this group are nearly twice as likely to invest in companies or funds which target specific social or environmental outcomes. Sustainable investing is becoming increasingly compelling, given the increasing awareness among them.

What should you do?

Build exposure in ESG funds within the barbell strategy. Select ESG funds which sit on both ends of our barbell portfolio – that is, superior growth-oriented funds on one end, and income-oriented funds on the other.

The information published by DBS Bank Ltd. (company registration no.: 196800306E) (“DBS”) is for information only. It is based on information or opinions obtained from sources believed to be reliable (but which have not been independently verified by DBS, its related companies and affiliates (“DBS Group”)) and to the maximum extent permitted by law, DBS Group does not make any representation or warranty (express or implied) as to its accuracy, completeness, timeliness or correctness for any particular purpose. Opinions and estimates are subject to change without notice. The publication and distribution of the information does not constitute nor does it imply any form of endorsement by DBS Group of any person, entity, services or products described or appearing in the information. Any past performance, projection, forecast or simulation of results is not necessarily indicative of the future or likely performance of any investment or securities. Foreign exchange transactions involve risks. You should note that fluctuations in foreign exchange rates may result in losses. You may wish to seek your own independent financial, tax, or legal advice or make such independent investigations as you consider necessary or appropriate.

The information published is not and does not constitute or form part of any offer, recommendation, invitation or solicitation to subscribe to or to enter into any transaction; nor is it calculated to invite, nor does it permit the making of offers to the public to subscribe to or enter into any transaction in any jurisdiction or country in which such offer, recommendation, invitation or solicitation is not authorised or to any person to whom it is unlawful to make such offer, recommendation, invitation or solicitation or where such offer, recommendation, invitation or solicitation would be contrary to law or regulation or which would subject DBS Group to any registration requirement within such jurisdiction or country, and should not be viewed as such. Without prejudice to the generality of the foregoing, the information, services or products described or appearing in the information are not specifically intended for or specifically targeted at the public in any specific jurisdiction.

The information is the property of DBS and is protected by applicable intellectual property laws. No reproduction, transmission, sale, distribution, publication, broadcast, circulation, modification, dissemination, or commercial exploitation such information in any manner (including electronic, print or other media now known or hereafter developed) is permitted.

DBS Group and its respective directors, officers and/or employees may have positions or other interests in, and may effect transactions in securities mentioned and may also perform or seek to perform broking, investment banking and other banking or financial services to any persons or entities mentioned.

To the maximum extent permitted by law, DBS Group accepts no liability for any losses or damages (including direct, special, indirect, consequential, incidental or loss of profits) of any kind arising from or in connection with any reliance and/or use of the information (including any error, omission or misstatement, negligent or otherwise) or further communication, even if DBS Group has been advised of the possibility thereof.

The information is not intended for distribution to, or use by, any person or entity in any jurisdiction or country where such distribution or use would be contrary to law or regulation. The information is distributed (a) in Singapore, by DBS Bank Ltd.; (b) in China, by DBS Bank (China) Ltd; (c) in Hong Kong, by DBS Bank (Hong Kong) Limited; (d) in Taiwan, by DBS Bank (Taiwan) Ltd; (e) in Indonesia, by PT DBS Indonesia; and (f) in India, by DBS Bank Ltd, Mumbai Branch.