Social and environmental investor sentiments are growing around the globe. Younger Asian investors, in particular, want to know what impact their investments will have. A recent Financial Times article headlined, Young Asians pursue impact investing that makes profit at home, reports that Asian billionaires who long stood at the sidelines of impact investing are finally warming to the idea of taking on socio-economic and environmental challenges at home. According to the 2018 Global Impact Investing Network’s (GNII) report on impact investing in Southeast Asia, the ten-year period between 2007-2017 has seen Private Impact Investors (PIIs) deploy USD 904 million and Development Finance Institutions (DFIs) deploy USD 11.2 billion in the region; an 80% increase in investments since 2013.
Where Do the Investments Go?
GNII reports that most investments in Southeast Asia were made in the financial services, energy, and manufacturing sectors. The report also points out that investors working with financial professionals who maintain local offices are better positioned at finding and managing the right investment opportunities than those without that access.
The following is a list of the 11 Southeast Asian countries the GNII report covers and the respective industry sectors which received PII and DFI investments.
- Cambodia: financial services, including micro finance, small and medium-sized enterprises (SME) finance, agriculture, education, energy, and Information and Communication Technologies (ICT).
- East Timor: micro finance
- Indonesia: financial services (both micro finance and commercial banks), energy such as geothermal power, wind energy, and hydropower, manufacturing, ICT, agriculture, healthcare, workforce development, water, sanitations and hygiene (WASH)
- Laos: clean energy, financial services, manufacturing
- Malaysia: consumer goods, financial services, manufacturing
- Myanmar: infrastructure, ICT, telecommunications services, microfinance, education tourism
- Philippines: energy (mostly geothermal energy and solar power), financial services, commercial banks providing loans to SMEs, healthcare, education, tourism, workforce development, agriculture.
- Singapore: energy, healthcare, ICT, financial services
- Thailand: energy, financial services, insurance providers, manufacturing
- Vietnam: financial services, manufacturing, infrastructure, ICT, healthcare
Impact Investments Moving Mainstream
A recent article in the The Business Times, titled The rise of ESG investing in Asia states that assets managed under responsible investment strategies (excluding Japan) still remain very low. With only 0.8% of total assets professionally managed under responsible investment guidelines, the Asian continent trails behind Europe’s 53%.
This growth opportunity is not getting lost on the financial industry. It creates more products that satisfy investors’ demand for financial products that promote good and provide market rate returns at the same time. For example, Singapore’s DBS Bank announced in a press release last year that it was partnering with Impact Investment Exchange (IIX) to set up “the Women’s Livelihood Bond Program, a series of bonds targeting a total of USD $100 million.” The program aims to lift one million women out of poverty helping to create sustainable livelihoods. There are other clear signs that impact investments are moving into the mainstream in Asia. The Business Times reports on an increased integration of environmental, social and governance factors into the investment processes of several Asian government pension funds including those of Japan, South Korea and Taiwan.
Meanwhile China is moving fast into the green investments space. The London branch of the Bank of China issued a USD 1 billion green bond in conjunction with a USD 380 million sustainability bond in Hong Kong in 2018. This was the fourth such offshore green bond offering in three years. “China was the No. 2 spot in our Top 10 list of global issuers for 2017. There’s more to come as the major Chinese Banks increase their green programs,” said Sean Kidney, CEO of Climate Bonds Initiative.
Social impact investing is a win-win situation; a market segment that we can all grow into together while prospering together with our clients and the beneficiaries of the impact investments.