While investors in Asia – such as Hongkongers – are relatively late to the world of sustainable investing, they could benefit from more mature regulations such as better anti-greenwashing rules, according to Pictet Asset Management. 

Perhaps one of the most notable issues faced by prospective sustainable investors has been the asset management industry’s propensity to market products to capture the trend – also known as ‘greenwashing’ – rather than abide by serious, disciplined definitions.

While Asian investors may be relatively nascent participants in sustainable finance, they may benefit from late entry into a more matured market with better safeguards built by regulators with real experience. 

«There will definitely be further development in regulation and policy embedded within the definitions of green funds,» said Freeman Tsang, Pictet Asset Management’s Asia ex-Japan head of intermediaries at a virtual briefing yesterday. «This will be the same in Asia.»

EU Regulations

According to Tsang, regulations in the EU, where the ESG market is more established, are often used as a proxy for future developments elsewhere.

He specifically underlined Article 6, 8 and 9 of the EU’s Sustainable Finance Disclosure Regulation (SFDR) regulatory framework which aims to enhance the transparency of investment strategies and specifically combat greenwashing. 

«If they are going for this kind of regime, then I think that will be the process we expect in Asia,» said Tsang. 

Catchup in Asia

Meanwhile, there will be plenty of time for the region to play catchup and also take the lessons learned by other markets.

Such is the case for Hong Kong where a very limited of investors – just 5 percent – have experience and current investments in ESG products, according to a recent survey co-published by Pictet Asset Management and the Hong Kong University of Science and Technology (HKUST). 

And overall, just 30 percent of respondents were aware of ESG at all.

Positive Outlook

Nonetheless, there was an indication of growing demand with nearly 55 percent planning to invest in ESG products within the next 12 months. 

«With the rising interest in ESG investing among Hong Kong investors, we see the gross sales of our nine ESG thematic funds increase 1.5 times in three years at March 2022,» added Tsang, highlighting interest in global environmental opportunities and clean energy. «Looking ahead we expect themes related to the ‘Social’ aspect in ESG to gain more attention, such as those investing in smart city and the future of food.»

The survey was conducted between December 30 last year and January 20, 2022 with 3,770 respondents in Hong Kong across demographics and income groups.