Hong Kong investors’ awareness and experience in environmental, social and governance (ESG) investing remains relatively low, but they express keen interest in taking part in the growing trend, a new survey finds.

This signals strong growth potential in ESG investing and green finance in the near future and the need to strengthen investor education, according to Pictet Asset Management and the School of Business and Management of The Hong Kong University of Science and Technology (HKUST Business School), which collaborated in the survey to understand the views and perceptions of potential individual investors towards sustainable finance.

According to the survey, around 30% of respondents are aware of ESG, and only 5% them have investment experience and are currently investing in ESG products.

Among those currently investing or planning to invest in ESG in the next 12 months, over 70% expect to allocate between 10% and 40% of their total investment to ESG products.

“ESG is currently not a familiar concept among the Hong Kong population with only a very small fraction currently investing in ESG products,” says Professor Tam Kar Yan, dean of HKUST Business School. “Given the importance of ESG in shaping a better world and building a sustainable future, there is a strong need to increase the society’s awareness of ESG.”

There is good potential for younger people to invest in ESG products, but more education will be needed on benefits of sustainable finance to society and the global community in order to get them on board with ESG investing, Tam adds.

Education needed

Christine Loh, chief development strategist, Institute for the Environment at HKUST, notes: “As governments, regulators and companies are increasingly focused on sustainable development, the value of ESG-themed investment is aggressively taking shape globally. Governments around the world are beginning to regulate what companies need to disclose because governments are adopting new policies that related to climate change, and social improvements.

“In order to succeed in their climate policies, governments need private sector investments to be directed towards green projects, and socially responsible projects. This survey shows that more investor education is needed to turn ESG awareness into action, and the investment industry plays an important role.”

The survey finds that respondents with higher monthly income are more aware of ESG investing: 47.8% of those with HK$70,000 (US$8,920) and above in monthly income are aware of ESG investing, compared with 28.2% of those with monthly income below HK$70,000.

There appears to be a gap between awareness and action. While some respondents are aware of ESG with investment experience, only 5% are currently investing in ESG products. However, there is strong investor intent, as among those currently not investing in ESG products, more than half (54.8%) are planning to invest in ESG products within the next 12 months.

Among the potential ESG investors, the majority (74.4%) expect to allocate between 10% to 40% of their total investments to ESG products.

Rising trend

Top three reasons selected by respondents who are currently investing in ESG products or planning to invest in ESG products within the next 12 months are:

1.   “ESG is the trend to come and I want to capture the opportunities.”

2.   “ESG investment brings long term benefits to the company, environment and society”

3.   “The focuses of ESG products align with my personal values”

The top three considerations of surveyed investors when making an investment decision are:

1.   Investment risks (80.8%)

2.   Understanding the product (79.8%)

3.   Past performance of the product (67.3%)

With product knowledge being a key influencing factor, more than 70% of investors who have not heard of ESG investing, would actively consider investing in ESG products if they know the investment products with ESG ratings can contribute to sustainable development and bring positive environment and social impact, and at the same time people are paying more attention to ESG globally.

Age is a significant factor, with the younger generation more willing to actively consider investing in ESG products. Even for those who have no plans to invest in ESG products within the next 12 months, the majority (75.1%) indicated that they would be more willing to invest in or pay attention to ESG products if ESG products have long-term positive impacts.

The survey was conducted online between December 30 2021 and  January 20 2022, collecting a total of 3,770 responses across different social demographic sectors.