Asian retail investors’ appetite for ESG products increases

A rising number of new ESG funds were launched in Asia during 2021, a Cerulli report shows

As of June 2021, the AUM under ESG funds, excluding negative or exclusionary screening products, increased to $94.2bn from $30.8bn in 2019, according to the consulting firm.

The jump was driven by new fund launches as well as managers’ rebranding of existing funds into ESG products.

“Although demand for ESG products in Asia-Pacific is still mostly driven by institutions, retail appetite has increased rapidly in recent years due to rising awareness after the outbreak of the Covid-19 pandemic,” the Boston-based firm said in a report.

“Support from industry players, such as investor education, and government initiatives have also contributed to increasing retail awareness,” it added.

For the first nine months in 2021, Asia has seen 161 new ESG funds launched, led by China and Japan with 76 new funds combined.

This number has exceeded that during the whole year of 2020, when only 107 new sustainable investment funds were introduced, leading by Japan and Australia, with 25 and 19 launches respectively.

In China, most of the ESG products offered are invested in the renewable or clean energy sector and the electric vehicle industry, according to Cerulli.

As of September 2021, there were 20 new energy vehicle funds and 32 new energy funds in China, with AUM of $13.8bn and $13.9bn respectively, accounting for more than half of the ESG product AUM in the country.

Taiwan also saw a surge in ESG funds supply, with 30 new products launched between January 2020 and September 2021.

According to an earlier report, Cerulli also found that ESG ETFs are gaining popularity among Apac investors as they seek cheaper alternatives to invest sustainably.

Other ESG aspects

Cerulli saw most ESG products in Asia focus on the environmental aspect and believes there are plenty of opportunities for managers in the region to launch products focusing on other ESG aspects.

“There is also a possibility for managers to evaluate fund launches centred around the United Nations’ sustainable development goals,” said the firm.

However, investors in each market are unique and have different product preferences. For example, Taiwanese investors prefer products with regular income as well as those with a thematic focus. In wealth management hubs such as Hong Kong and Singapore, introducing offshore-domiciled funds could serve sophisticated investment needs.

From an earlier survey, Cerulli also found 64% of fund managers across Asia indicated plans to launch ESG funds over the next two to three years.