There is a rising demand for sustainable investment products among retail investors in Asia, according to a report issued by research firm Cerulli Associates.
While the ESG funds market is still dominated by institutional investors, awareness among retail investors has increased, thanks largely to the Covid-19 pandemic as well support from industry players, investor education and a number of government initiatives.
Analysis of Morningstar data showed that ESG fund launches have increased globally in the past two years and especially so in Asia Pacific. Between January and September 2021, there were 161 ESG fund launches, led by China and Japan with a combined 786 launches.
Similarly, seven of the top 20 sustainable investment funds were China-based vehicles focused on the renewable/clean energy sector.
The data also shows a regional focus on environmentally-themed funds. This, states Cerulli, presents an opportunity for fund managers to focus on social and governance-focused funds.
According to Siau Kean Yung, Cerulli Associates analyst, there is a role for global fund managers to accelerate the adoption of ESG funds the region’s retail investors.
“The lack of ESG expertise among local managers in most Asian markets could be an opportunity for global asset managers to offer ESG products through funds of funds, feeder funds, and subadvisory arrangements, especially in Southeast Asia and Japan, or registering offshore funds in markets such as Hong Kong and Singapore,” he said.
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