Pandemic boosts adoption of ESG principles: survey

About 76% believe that equities under ESG would attract the most interest and in-flows.

Nearly seven in ten (66%) respondents believe that the COVID-19 pandemic is slated to accelerate the adoption of environmental, social and governance (ESG) principles-driven investments, according to a survey by the Investment Management Association of Singapore (IMAS).

Amongst this figure, 76% indicated that equities would attract the most interest and in-flows. Other asset classes that ranked second and third in importance are multi-asset (12%) and alternatives (8%), respectively.

“Before COVID-19 hit, we were already seeing strong sentiments about the adoption of ESG investments amongst 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,” said Rajeev De Mello, chair of the IMAS Development Committee.

For the financial markets in general, lockdowns and re-openings (42%) topped the list of drivers for financial markets that have become more relevant during the COVID-19 period. Further, 64% are anticipating further monetary easing measures to help society and the economy recover from the pandemic.

Amongst investing strategies, 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.

However, 27% of respondents stated that a delay of the COVID-19 vaccine development is a top threat to Singapore’s asset management industry., on the back of its impact on growth via confidence, trade and travel. The next highest risks amongst 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.

In addressing such concerns, 68% are looking to increase adoption of technology to create flexibility to cope with future health crises. Half of respondents also stated that they will continue to 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 whilst 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.