Accelerating Adoption of ESG Investing as well as Technology Rated as Key Strategies for Investment Managers, according to IMAS Special Mid-Year Survey

SINGAPORE, 13 August 2020 – This period of COVID-19 dislocation will accelerate the adoption of Environmental, Social and Governance (ESG) principles-driven investments, according to a new survey conducted by the Investment Management Association of Singapore (“IMAS”).

 

The IMAS Special Mid-Year Investment Managers’ Outlook Survey 2020 was conducted in light of the pandemic and takes the pulse from senior investment professionals about issues ranging from their near-term outlook to broader trends in the investment management industry. The survey was conducted in June 2020 and gathered responses from 50 respondents who are mainly CEOs and CIOs of fund management companies based in Singapore.

 

Nearly seven in ten (66%) respondents believed the pandemic will accelerate the adoption of ESG investments, with 76% indicating that equities would attract the most interest and in-flows. Other asset classes that ranked second- and third-most in importance are multi-asset (12%) and alternatives (8%), respectively.

 

Mr Rajeev De Mello, Chair of the IMAS Development Committee, said: “Before COVID-19 hit, we were already seeing strong sentiments about the adoption of ESG investments among our member firms. ESG was ranked the leading future driver of investment growth in the next three years, based on the IMAS 2020 Annual Survey released in January this year. The latest survey results put to bed that the adoption of ESG investments was a bull-market phenomenon.”

 

Ms Susan Soh, Chair of IMAS Executive Committee, added: “We had anticipated that 2020 will be the biggest year yet for ESG, and the survey has demonstrated clearly that even COVID-19 has not dampened the pace of ESG adoption. IMAS has been actively promoting the adoption of ESG-principled investments and collaborating with industry stakeholders. For instance, we recently worked with MAS to co-create the proposed Guidelines on Environmental Risk Management for Asset Managers, which was recently launched for public consultation. On the IMAS iLearn platform, we are currently developing an e-learning module on ESG investing that would not only promote awareness, but also educate the industry on how to apply the MAS Environmental Risk Management guidelines.”

 

According to Philippe Tassin, Head of Asset Owner and Managers Asia Pacific at BNP Paribas Securities Services: “The sentiment that ESG adoption will accelerate aligns closely with the findings in the most recent BNP Paribas ESG Global Survey 2019 of asset owners and managers, which revealed a stronger commitment to responsible investing since the previous survey conducted two years prior. There was a growing belief in the link between incorporating ESG into investment decision-making and better risk-adjusted returns. At the time, data and costs remained the biggest barriers to integrating ESG into investment decision-making, and organisations were planning to invest more in technology and hire specialists to overcome the challenges. Well before ESG became a mainstream talking point, BNP Paribas launched an ESG reporting and analytics solution in 2016.”

 

Other key findings from the survey include:

• Drivers of financial markets: Lockdowns and re-openings (42%) topped the list of drivers for financial markets that have become more relevant during the COVID-19 period. The effects of the broad and significant easing in monetary policies around the world (32%) are viewed as the next most important driver for financial markets.

• Further monetary easing measures expected: More than six in ten (64%) anticipate further monetary easing measures to help society and the economy recover from the pandemic. A minority (18%) expect that Central Banks have done enough to cushion the global economy or will pause while fiscal stimulus programs are implemented.

• Investing strategies that could grow in popularity in 2021: Active equity took the lead (19%) as the top strategy that could grow in popularity next year. Meanwhile, 42% of respondents said they expect demand for passive instruments/ETFs to accelerate for the next decade compared to the previous decade.

• Top threats to the Singapore asset management industry: A delay of the COVID-19 vaccine development (27%) — and its impact on growth via confidence, trade and travel — ranked as the highest risk to the industry. Next highest in the list of threats are the shock that end investors feel by the scale of market movements over the last three months (22%), as well as the possibility of investors needing to raise cash (21%) to re-allocate their portfolios.

• Increasing technology adoption key in managing challenges: When asked what their firm’s plan was to deal with the more challenging business environment arising from COVID-19, nearly seven in ten (68%) said they would increase adoption of technology to create flexibility to cope with future health crises.

• Flexible work arrangements will be a new default: Half of respondents said they will offer most employees the option to work from home when they want, even when telecommuting is no longer mandated or prescribed by the government. Investment teams indicated a preference to maintain their teams in the office while giving employees the option to work from home. The lack of social interaction as a result of telecommuting, however, was a concern for 34% of respondents.

 

Ms Carmen Wee, CEO of IMAS, added: “If there is only one thing this pandemic has taught us, it’s the value of collaboration across the industry. The spirit of multi-stakeholder partnership is well and truly alive for IMAS. To help address the industry’s aspirations and ambitions, we have embarked on a slew of initiatives. For example, IMAS is part of the Singapore Stewardship Principles Steering Committee to promote and administer the Singapore Stewardship Principles for Responsible Investors. We are also part of the Advisory Group to the World Wildlife Fund’s Asia Sustainable Finance Initiative to help Singapore financial institutions deepen their sustainable finance expertise.”

 

To help the industry harness innovative digital solutions to reduce costs and increase alpha, IMAS also introduced the Digital Accelerator Programme, the first of its kind in the region for asset management, to help the industry discover tech solutions to the challenges they face.

 

Since the inaugural DAP in 2019, IMAS’ member firms have successfully engaged with the best and brightest tech firms and their cutting-edge technologies for mutual collaborative opportunities. The second-year edition of the IMAS DAP 2020 has attracted more than 200 entries from fintech firms all over the world. In the weeks ahead, IMAS will be announcing the finalists for each of the ten problem statements that seek proof-of-concepts ranging from gamification to quantifying ESG impact of a portfolio.