Absence of uniform ESG benchmark should not be a “showstopper”: GoImpact

26 Sep 2019

The investment industry should forge further ahead into the sustainable investing space rather than get distracted by the absence of a uniform benchmark, according to Helene Li, CEO and co-founder of GoImpact, a recently established firm that facilitates sustainable investing implementation.

Inflows into sustainable products amongst Asia’s HNW clients have been comparatively modest and private banking sustainability heads have told Asian Private Banker previously that there is a lack of ESG benchmarks and that developing ESG product screening and rating processes could be a roadblock for sustainable investments. Li believes these challenges should not hinder private banks’ sustainability efforts.

“It has been perceived as one of the showstoppers but it doesn’t have to be because you have more than one set of benchmark even in capital markets,” said Li, adding that it is important that intermediaries “walk the talk” in line with their campaigns and forums on sustainable and ESG investing.

She stressed that demand for socially positive investments is “loud and clear” among Asian HNW clients, especially next-gens. Indeed, a recent RBC report found that Asian HNWIs are more committed to ESG than their Western counterparts.

“In short, I think the banks can do more. Some are doing more than others but if this can be placed in the business agenda and not only in the forum agenda, it would help to move the needle in the sustainability issue we all face,” she said.

A number of private banks have made significant strides in the ESG space of late. Deutsche Bank, for example, recently adopted MSCI’s ESG rating system to better meet client demand, while USB Global Wealth Management is currently implementing an ESG assessment framework across all its in-house and third-party funds.

Li added that Asian investors’ active and transactional-led approach to investing has also contributed to smaller inflows into sustainable assets compared to Europe.

“Asian investors are more hands-on and transactional compared with their European counterparts, who are more adaptive to DPM, which could help to promote sustainable investments,” she said.

“We are seeing a shift of Asian investors to more mid-long term, less transactional types of portfolios now and this might help in moving the needle on that.”

According to Li, inflows into sustainable investments are also hindered by a narrower range of products in the region — although the quantity of ESG-related offerings is increasing, variety is still lacking in Asia.

In addition to “walking the talk” and improving scope, she said regulators can play their part by insisting on quarterly rather than annual sustainable investing reports for banks and listed firms as it would keep sustainability at the forefront of the industry’s collective mind.

Both the Hong Kong Monetary Authority (HKMA) and the Securities and Futures Commission (SFC) have launched green finance frameworks, aiming to assess the “greenness baseline” of financial institutions in a bid to support and promote the development of sustainable finance across the city.