The Jakarta Post
Singapore’s largest bank the Development Bank of Singapore (DBS) is seeking to boost the amount of funds it will channel into green investments as investors’ appetite for environmental, social and governance (ESG) investment products increases.
DBS, Singapore’s largest bank, recently announced that it planned for 8 to 10 percent of its total assets under management (AUM) to be channeled into sustainable investments within the next five years. As of 2019, the bank’s AUM stood at S$245 billion.
“Eight to 10 percent of AUM we believe is a very good target. Just to give you a sense of comparison, the average bank in Asia currently has about 5 percent of their AUM in ESG-type investments,” DBS group head of private bank Joseph Poon said during a media briefing on July 14.
“We all believe that social good is good for the soul, it’s good for business, it’s good for the community,” Poon went on to say. “So, we want to be ambitious and double that amount in five years’ time”.
Although a standard definition is lacking, sustainable or ESG investing largely refers to financing efforts that contribute to mitigating the impacts of climate change. This may include financing the pursuit of a low-carbon economy, or supporting businesses that implement ethical conduct and empower the local community, among other criteria.
Poon added that the bank had seen growing interest among millennials in ESG investing. “Millennials are more willing to express their values through investments,” he noted.
The pandemic has left an indelible mark on investors, with reports indicating that the pandemic has altered how they think about their finances. It is especially true among millennials, a survey has shown.
A UBS investor watch news release, published on July 13, said that millennials had been the most affected by the pandemic, writing that they were now more concerned about their finances than older generations.
“They are also concerned about having their money make a societal impact,” the report said. A third of millennials surveyed have increased financial support for family and friends, 69 percent are interested in sustainable investing and 60 percent in philanthropy because of the COVID-19 pandemic.
These preferences will likely determine long-term trends in investing, Moody’s Investors Service wrote in a report published on Feb. 27. It said that the shift toward ESG products would be enduring, as the young cohort that was beginning to invest in the financial market was characterized as being more socially conscious.
The desire to avoid future losses is another reason investors are turning to ESG products.
“With greater recognition of the risks and opportunities arising from ESG considerations, such as climate change, investors are increasingly focused on avoiding investment losses connected to these risks, and on positioning themselves to profit from correctly anticipating climate and social trends,” the report reads.
Moody’s Investors Service estimated that the total addressable market size for ESG products was a rather significant US$89 trillion, more than half of the $129.6 trillion in total global invested assets.
“The United Nations expects that within the next 20 years, Indonesia will be one of the top 10 economies in the world. So, Indonesia, in the long run, is a great economy to invest in if you want to be in ASEAN,” DBS Bank group head of consumer banking and wealth management Sim S. Lim said.