Two of the world’s largest sovereign wealth funds stressed the importance of diversification to seek out returns in fragile markets
Singapore, 18 March 2021 – 2021 will be the year where ESG investments in Asia will see significant growth and traction, according to 60% of participants polled at the IMAS-Bloomberg Investment Conference 2021. Over 40% of the audience said that resilience and outperformance of ESG investments will be key driving forces of growth in Asia this year. 23% believed that the accessibility, transparency and quality of ESG information will improve, further driving adoption of sustainable investing in the region.
Close to 800 of Asia’s most influential investors and thought leaders in the asset management industry attended the virtual event on March 9, to rethink the future of capital in making 2021 and beyond more resilient, inclusive and sustainable.
One of the most important trends emerging from the pandemic was the significant rise of investor interest in ESG investments. At the conference, Ravi Menon, Managing Director, Monetary Authority of Singapore announced that MAS will be placing US$2 billion of funds to a select group of asset managers that it has identified to be committed to deepen green finance activities out of Singapore. Mr. Menon emphasized that climate risk is a risk that is far too important for investors to ignore and capital must be allocated to transition to a net-zero economy.
Susan Soh, Chairman of IMAS added: “As part of capability building efforts, IMAS will be launching a new module on Sustainable Investing and the MAS Guidelines on Environmental Risk Management on its iLearn, a one-stop portal that offers and centralises curated training for the asset management industry. More than 800 financial industry professionals, from over 60 firms, have been trained through iLearn.”
Chong Jiun Yeh, Chief Investment Officer, UOB Asset Management, also said that “across Asia, asset owners are stepping up to incorporate ESG actively into their investments. ESG integration, especially in a post-COVID-19 world, will help to enhance returns and to mitigate risks. It will also help ensure that capital is steered towards investments that will forge a sustainable future for all.”
COVID-19 remains top of mind among investors in the region with 43% saying that economic recovery from the pandemic will be the biggest trend that will impact how capital is deployed and managed this year, followed by technology disruption and sustainability as key investment themes.
According to Sue Brake, Chief Investor Officer, Future Fund, the ‘fragile’ economic environment during the pandemic drove the Australia-based fund to rethink its portfolio approach. In her closing fireside chat with Mark Burgess, OMFIF Chair, she shared how the investing community was rethinking the balance between risk, return and sustainability in a world where returns are likely to remain low and fiscal stimulus is affecting the characteristics of the market and asset values.
Besides assessing underlying trends, she called out scenario planning, stress testing and weighing the range of possibilities as crucial to positioning a diverse portfolio in an increasingly fragile market. Brake added that tapping external thinking is absolutely critical to provide different perspectives that could help in scenario planning. The need for more granularity and focusing on the elements of the selection process too, is necessary to improve the probability of success in achieving sustainable returns over the long term.
“Diversifying is the only free lunch in finance” was a phrase by Lim Chow Kiat, Chief Executive Officer of GIC that was explored throughout the conference. He shared some key trends that have emerged as investors rethink their return, risk and strategy, noting that building optionality to capture more opportunities and diversifying across asset class and geographies is a good approach to take in a world of uncertainty and risks. As such, GIC has adopted a more “macro cautious, micro positive” outlook. Lim pointed out that “transition” is a big theme and like the vaccine, technology will be one of the drivers of achieving sustainability, which is why the firm is looking closely at renewable technologies. Another transition is in geopolitics as a new multipolar structure would raise the spectre of chronic and intense competition across many fields. There are reasons for expecting healthy competition including economic interdependency, deterrent and common global threats. At the same time, trust deficit, anarchic structure, perception asymmetry and domestic politics are reasons to be concerned. This is a critical investing issue.
“As wealth creation in Asia continues to lead the world, the need to redesign capital for the better has become more crucial,” said Steven Yankelson, Head of ASEAN, Bloomberg. “This is a crucial time to have conversations and rethink the purpose of capital. One thing is for certain, investors we work with are considering ‘Alpha with Impact’ – the need to invest in innovative technology to achieve operational alpha to stay competitive, the need to ramp-up investment alpha by exploring new areas for growth and the need to incorporate sustainability considerations into their investment strategies.”
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About the Investment Management Association of Singapore (IMAS)
Representing over 100 investment managers with assets under management in Singapore over SG$1.4 trillion, the Investment Management Association of Singapore (IMAS) seeks to set the benchmark for the investment and fund management industry in Singapore by fostering high standards and professionalism while promoting exemplary practices among its members. IMAS is the representative body of investment managers spearheading the development of the industry in Singapore. It serves as a forum for members in discussions as well as a collective voice where representation is needed on behalf of the investment management industry, facilitating training for its members, and contributing towards investor education.
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