German asset manager DWS Group expects its sustainable or socially responsible investing assets to continue growing over the next few years, partly from growing adoption by Asian investors.
Pieter Furnee, DWS’s global head of responsible investing coverage, says the company’s environmental, social and governance (ESG) assets under management more than doubled from 20 billion euros (US$22.38 billion) in December 2017 to 47 billion euros a year later.
He says the growth of ESG assets in recent years has been driven by a number of factors, including clients' changing demand and regulatory changes.
"Interestingly, we see that peer pressure is also playing a role in ESG adoption. For example, an asset manager starts to adopt ESG practices or [they are] setting up ESG funds, after seeing their peers doing so," Mr. Furnee says in an interview with Asia Asset Management.
According to a report by the Global Sustainable Investment Alliance, at least $30.7 trillion was held in sustainable or green investments at the end of 2018, a 34% increase from January 2016.
The April 2019 report highlights Asia as one of the fastest growing regions in the adoption of sustainable investments. It notes that sustainable investing assets in Asia as a share of total managed assets in the region jumped from 3.4% in 2016 to 18.3% in 2018.
According to Mr. Furnee, his conversations with institutional investors in Asia has shifted from “what is sustainable investing?” to “how can I apply sustainable investing to improve risk and return profile of my portfolio?".
"[A] growing number of Asian institutional investors are now taking sustainable investing seriously. They are taking governance topic seriously, they want to know who is running the company. They understand that sustainable investing can significantly improve their risk profile," he says.
He adds that Japanese institutional investors are key drivers of sustainable investments in Asia, backed by Japan’s Government Pension Investment Fund’s plan to increase its exposure to these investments.
"For Japanese institutional investors, they see climate change as an important topic. It is a real issue," Mr. Furnee says.
Frankfurt-based DWS had 662 billion euros of assets under management at the end of 2018.