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SRI in Asia
The fact that it’s easy to number all the SRI (Socially Responsible Investing) fund options in Asia does not do justice to the growing interest there. SRI, now arguably a mainstream investment product in the West, has enormous potential in the East, and interest is visibly growing.
According to the Asia Development Bank, Asia’s environmental pollution is “pervasive, accelerating and unabated.” The World Health Organization estimates that 12 of the 15 cities with the worst air particulate in the world are in Asia. A significant proportion of Asia’s industrial base has yet to be built, offering a unique opportunity to introduce clean technology and infrastructure development now, to avoid the clean-up-later approach of more developed countries. The private sector can have a critical influence.
The development of an SRI industry can make a significant impact by encouraging best corporate practices around the region.
Apart from Australia, which has a fully fledged SRI market, Japan is the most developed SRI market in Asia. Although the first SRI-related fund was launched in Japan less than three years ago, there are now 11 fund options for a total of almost $1 billion at current market valuations. There are six domestic eco-funds, two international eco-funds, one domestic SRI fund and two international SRI funds. The Daichi Life and Nikko Eco Funds were the first to be launched in 1999. The Nikko Fund was immensely popular in the retail community and far exceeded its capital raising expectations. That spurred other fund providers to set up eco funds. More recently, Nikko made another pioneering move – it established a Global Sustainability Fund that considers environmental and social factors.
After Japan, Hong Kong has the most SRI fund options. There is still a lack of Asian funds invested in Asia, but perhaps the recent launch of global SRI funds in Hong Kong by some of the large international SRI players is an indication that fund managers are recognizing the opportunity. There are four global SRI fund options. Henderson Global Investors launched their Horizon Global Sustainable Investments Fund in Hong Kong last year and Friends Provident launched their Global Portfolio with an engagement overlay in Hong Kong. Kingsway Fund Management has adopted screening policies as part of their investment strategy, and provides the only SRI pension option as part of the Mandatory Provident Fund scheme in Hong Kong. Kingsway is also launching a more active Asian SRI fund.
There is only one fund option in Singapore. In 1999, Unifem and United Overseas Bank launched the United Global Unifem Singapore Fund targeted at women and invested in companies that show a commitment to empowering women. There is one global eco fund in Taiwan but limited marketing means that awareness of the fund is low. Recently, the Thai Stock Exchange created an SRI fund, so that the California Pension Fund’s withdrawal from their stock market would not hurt the better employers.
Similar to SRI retail investors around the world, female, first-time investors have been the prominent buyers of Japan’s SRI funds and the Singapore fund. The latter has also attracted a high proportion of blue-collar workers, defying the view that SRI is only for the wealthy. The Hong Kong and Taiwan retail markets seem to display similar characteristics to other countries where SRI has been successful. There are active religious groups, a vibrant NGO community, many people employed in the caring professions, large charities and a significant female working population. And there is a culture of retail investing.
Actual penetration remains low – 5% of Hong Kong’s population own a mutual fund – so there is plenty of opportunity to appeal to first time investors who want to invest in line with their values.
SRI in Australia
The Australian SRI market is on the move – the last two years have seen a meteoric rise of ethical investments. From humble beginnings with a handful of funds, there are now 23 fund managers – many of them mainstream – offering ethical options.
A survey sponsored by the Ethical Investment Association of Australia in 2001 estimated the funds invested in ethical/ SRI investments in Australia to be about A$10.5 billion. This is not large compared to the U.S., but for a small Australian population of 20 million people it represents 86% growth between 2000 and 2001.
In Australia, the term ‘ethical investments’ is still used rather than SRI which is preferred by most English speaking countries.
Recent findings by the research house ASSIRT substantiate that Australian investors are ready and willing to purchase such investments, but are not aware of them. The survey concluded that 65% of investors with managed funds had not heard of ethical investments, but that once the features were explained, over 80% said they would regard those funds as equal or better to traditional funds, and over 40% would favor investing ethically.
“That’s a very large audience to educate,” said Vanessa McMahon of ASSIRT. “With over 60% of these investors visiting financial planners, I believe planners are in an ideal position to inform their clients about the range of investment options available.”
A 2001 Rothschild study surveyed 4000 planners and found that while only 20% use ethical funds, and still see this type of investment as a small portion of a client’s diversified portfolio, 58% of respondents said they were considering using them in the future. As for investors, they found the top ethical issues are: environment, human rights, workplace practices, animal welfare, weapons and uranium mining. Of least concern were gambling and alcohol – Australians typically have a relaxed attitude toward these issues.
An increasing number of industry super funds offer ethical options, as the Australian superannuation industry is moving into a more competitive and retail sensitive environment. In 2001, anEthical Investor Magazine survey of 37 industry and corporate super funds, representing $58.8 billion (38% of the total funds), found that:
* in early 2001 only seven funds offered an ethical option
* in 2002, 21 super funds with combined investments of over $40 billion offered this option or declared an intention to do so for their 2.5 million members.
Half of Australia’s super funds are at various stages of investigating SRI, the other half are not considering ethical at all. The motivation for SRI options was noted as 50% trustee interest (preparation for public offer and member choice), 30% member interest, and the remaining 20% constituted a combination of both.
This March, Australia introduces its ethical disclosure requirements under the Financial Services Reform Act. It is similar to the UK Pension Law. It obliges issuers of financial products to disclose the extent to which “labor standards or environmental, social or ethical considerations are taken into account in the selection, reten
tion or realization of an investment.” The regulation requires product issuers to make two separate Product Disclosure Statements – one on labor considerations, the other on environment.
Fueled by the debate on corporate transparency and social responsibility now publicly demanded by governments and shareholders, ethical investing will emerge as the unifying alternative to the non-questioning investment styles. I share Amy Domini’s opinion that “socially responsible investing stands on the cusp of enormous growth.”
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| Louisa Mitchell, author of the Asia portion of this article, is Executive Director of ASrIA, the Association for Sustainable and Responsible Investment in Asia. www.asria.org Eva Willmann de Donlea, author of the Australia portion of this article, works as a consultant and financial planner with the Ethical Investment Company of Australia P/L and is a director of the Ethical Investment Training Group. Contact her: ew@consciousinvest.com.au |
Excerpted from The GreenMoney Journal, a SustainableBusiness.com Content Partner.
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