Social factors rank higher for investors in Asia than Europe

Research shows difference in ESG priorities across continents

Investors in Asia are twice as likely to have social factors in their top ten priorities when investing in an ESG fund than their European counterparts, according to research by Architas.

The investment firm surveyed 11,000 investors in 11 countries across Europe and Asia to gauge the perception and understanding of ESG.

In the six Asian countries – Japan, the Philippines, Singapore, Thailand, Indonesia and the territory of Hong Kong – social factors featured on average 2.3 times in the top ten priorities. For the European countries – Belgium, France, Germany, Italy, and Spain – they featured 1.2 times on average.

The social factors respondents could choose included a company’s ethical values, if it was supporting the combat against global poverty, supporting healthy lives and well-being for all people and supporting access to quality education.

The question of how ethical a company’s values are was the social consideration to appear most frequently for investors in Asia. In Europe it was the question of whether a company was supporting healthy lives and well-being which appeared most often.

Source: Architas

In terms of social considerations, the outliers in Europe were Germany, where the top ten priorities featured no social considerations and in Italy where three could be seen.

There was also a difference in how investors across the two continents view environmental factors. These featured more heavily in the priorities of investors in Europe, appearing in the top three concerns of all five countries whereas they appeared lower down the rankings in Asian countries.

Transparency above all

Architas found the factors that came out on top for investors in all countries were governance factors, namely transparent accounting which all countries, except Germany, deemed most important when investing in an ESG fund.

On the whole the data showed younger investors are more likely to feel that an ESG fund would outperform a non-ESG fund of the same risk level.

And in terms of fees, a majority of retail investors in both continents were prepared to pay extra for ESG funds but the number was higher in Asia, 68%, than Europe, 51%.

Architas pointed out that the industry needs to take note of the fact these retail investors do not see ESG as synonymous with environment issues alone, even if for many ESG just means green finance.

Nicolas Deschamps, Architas head of ESG, said this is the time to be listening to investors as the world rebuilds from Covid-19 and we see sustainable finance momentum growing: “Net zero targets have now been set in place for all major economies. Capital flows and investor interest show we are passing a point of critical mass with ESG, so it is vital we set the right course now, to serve us well for the years to come.”