How can Hong Kong investors approach sustainability?

A survey found 67% of investors are driven by the higher potential return of sustainability.

Hong Kong investors are after higher returns when it comes to investing in sustainability, Schroders said, as 67% perceived it as a key driver.

The approaches most preferred by Hong Kong investors are impact investing (75%) and thematic investing (65%), which are higher when compared to the entire Asia region with 38% and 43%, respectively.

Other approaches preferred by Hong Kong investors include rising above ESG integration (60%) and negative screening (60%) methods.

Moreover, funds with specific sustainability goals such as attention to environmental issues (54%) or health and wellness (50%) were found to be their go-to choices apart from those with a broad sustainability focus (54%).

Schroders noted this interest amongst Hong Kong investors in impact and thematic investing is in line with their stewardship actions. Around 71% of Hong Kong institutional investors believe that engaging on environmental issues such as climate change or the use of fossil fuels is one of the most important aspects.

Some 80% of investors, however, flagged doubts about the ability to measure and manage risk when investing sustainably. This is due to the lack of transparency and reported data.

“Concerns around sustainability measurement are particular evident in Hong Kong and highlights that, as an industry, we still have a long way to go to make investors feel confident that they have all the tools and information to make informed decisions,” Mervyn Tang, Head of Sustainability Strategy, APAC, Schroders, said.

Meanwhile, 62.5% of respondents said the pandemic had little to no impact on how they viewed sustainable investments, which signals investors are already accustomed to sustainable investment.

When asked about what could affect their portfolios in the next 12 months, 79% of Hong Kong institutional investors cited geopolitical risks, whist 96% expected currency risk to have a moderate impact on their returns.