Environmental, social and governance (ESG) investing has become an important factor for wealthy families in Asia to consider when strategizing on how to grow and preserve their generational wealth.
And though the approach to generating impact might be different among Asian families, especially compared with the US, one private banker observes a particularly strong interest developing among the second and third generations domiciled in Southeast Asian markets.
“I encourage all family offices to really think about, first of all, your family values, and get the DNA of the family sorted out and identified,” says Woon Shiu Lee, DBS Private Bank’s managing director and group head of wealth planning family office and insurance solutions, speaking during the “How ESG is redefining wealth management” session of the 5th ESG Summit, organized by The Asset in Singapore. He adds that families can incorporate this energy and focus into making investments that will further their value.
But in terms of the actual way of incorporating ESG, Asian families have different approaches. “It’s quite rare for Asian family offices that I serve to really just do 100% in value investment,” Lee points out. “But that’s a view coming from family offices in the United States where they only do impact investments, and I don’t expect to see that soon [in Asia].”
In Asia, Lee explains, DBS applies a “satellite approach”. Once the investment objective and the expected impact are identified, the bank deploys resources accordingly. "You hire an investment research team, or you make sure you have a dialogue conversation with people in the west who are really involved in the [ESG] ecosystem.”
Then, family offices in Singapore, although at different levels of maturity when it comes to ESG investing, will be served either via outsourced expertise or through partnership.
Woon Shiu Lee managing director, group head of wealth planning family office & insurance solutions at DBS Private Bank speaking at The Asset's 5th ESG Summit
“Some of these families or family offices themselves are already in the [ESG] space,” Lee observes. “Some of these are very willing to bring along a partner [and new investment ideas]. And that’s where you also get inspired when you hear of your peers and other family offices getting much better returns on impact investments.”
Generally, in Asia, the first generation of wealth might still focus more on investment returns, but younger generations are becoming increasingly concerned about environmental and social topics when investing. Lee finds a particularly promising outlook when it comes to ESG investing among wealthy Southeast Asian families.
“Assessing some of these [ESG] investments is very much different from the perspective of the second and third generation in Southeast Asian countries,” he observes. “I do see a more willing appetite in Southeast Asia. China, for instance, is very much still on the first generation, so you can imagine that in terms of speed and receptiveness some of these [ESG] ideas are at two different levels.”
It is important, Lee points out, for private banks to make sure that there is more widespread acceptance of ESG ideas. “But we are in very lucky times. The government is our huge tailwind, they are driving all these [ESG-related] conversations together with us.”
Singapore as a wealth hub, he says, is well positioned, not just in the wealth management and private banking space, but also in terms of bringing ESG conversations into practice and generating real impact.
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