Ms Cheryl Lim, 27, uses a canvas bag when she shops for groceries, recycles or donates her old clothing, and even has her own reusable cup designed specifically for bubble tea.
Like most of her values-driven millennial peers, she cares about the environment and actively takes steps to reduce her carbon footprint.
Yet the fintech executive, who already has three years of investment experience, shies away from sustainable investments – investments that incorporate environmental, social and governance (ESG) factors. Why?
“I do want to invest in companies that are green, but I’m sceptical about whether it actually helps the environment,” says Ms Lim.
She is unsure about just how “green” these investments truly are, especially as investors and regulators alike have sounded the alarm on “greenwashing” – where companies exaggerate their sustainable practices.
“I’ve read about cases where companies are just putting on a token show of ‘green practices’, and market themselves as eco-friendly, but they still carry out environmentally damaging practices. We don’t know about it until much later when they are exposed.”
“I can’t be sure that any company is really green, so I don’t really factor that into my investments,” she says.
She is not alone. According to UOB’s FinTech in ASEAN 2021 report, one in two respondents are aware of sustainable investments. But among those who are aware, almost half do not have any sustainability-focused assets.
Like Ms Lim, about 18 per cent of respondents feel that their investments would not make a difference to the environment.
Other reasons for shying away from green investment include being unable to find a suitable product to invest in, and the belief that the returns would be lower than other asset classes.
Investing for planet and profit
While it is true there are cases of companies inflating their green initiatives, there is good reason to keep the faith.
Studies have shown that the misconception of lower returns and lack of environmental impact does not apply to all sustainable investments. And finding the right green products can make a difference in returns.
A 2020 study by public research university Imperial College London and the Paris-based International Energy Agency (IEA) concluded that renewable power portfolios had outperformed fossil fuel portfolios – with up to seven times higher returns.
Another study, by Canada-based investment manager RBC Global Asset Management in 2019, found a positive link between companies that had good environmental records and their stock price performance.
Last year, the MSCI World ESG Leaders' index recorded its highest annual gain so far. It rose by 23 per cent, outperforming the MSCI World index’s 14.4 per cent.
With more studies showing the benefits of sustainable development, financial institutions are looking to cater to investors who are looking to do good and do well at the same time.
At the IMAS-Bloomberg Investment Conference in Singapore last March, Mr Ravi Menon, managing director of the Monetary Authority of Singapore (MAS) said in his keynote address, “The future of capital is green.”
“There is growing evidence that investments incorporating strong ESG considerations can reduce exposure to systemic risks and improve resilience to market shocks.”
To tackle greenwashing, MAS announced last November that banks in Singapore will undergo “stress tests” that include climate-related scenarios while making regulatory disclosures starting this year.
This ensures that the banks are managing risks related to climate change and other environmental issues, said Mr Menon. Data verification of green products using technology will also be required.
ESG and technology
Says Mr Thio Boon Kiat, CEO of UOB Asset Management (UOBAM): “The investment community has a key role to play in supporting sustainability and the growing emphasis on ESG issues by channelling capital into sustainable opportunities, while supporting the United Nations’ Sustainable Development Goals.”
“At UOBAM, we recognise that we have an important role to play as socially responsible stewards to drive sustainability in the world,” he adds.
That is why UOBAM has integrated ESG evaluation into its investment process across all investment asset classes. This will help identify high-quality companies which are resilient, well-managed, able to grow sustainably and are likely to maintain their long-term competitiveness.
UOBAM also combines its investment expertise with high-quality data and algorithms. It augments its proprietary ESG research with artificial intelligence-machine learning (AI-ML) models to construct and optimise its ESG investment portfolios.
“By doing so, we can accommodate our clients’ needs to invest for profit and purpose, as we manage their wealth successfully, responsibly, and sustainably,” says Mr Thio.
To help make sustainable investing more accessible, UOBAM provides financial tools that help retail investors get an expertly crafted portfolio with sustainable investments within minutes.
One example is UOBAM Robo-Invest, the robo-advisory service launched by UOB’s asset management arm. Users of the mobile wallet Singtel Dash can tap on UOBAM Robo-Invest to invest with purpose easily.
After a quick risk profiling questionnaire, UOBAM Robo-Invest leverages an optimisation model that helps to maximise portfolio returns according to the investor's defined level of risk. Investors can choose the ESG portfolio to invest sustainably.
This is the first of a five-part series in partnership with