A ‘silver tsunami’ goes to durable assets

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Sustainable investments can have good returns as a “tsunami of money” pours into those assets, said Piyush Gupta, managing director of DBS Group, Singapore’s largest bank.

“The truth is, there is a tsunami of money headed for ESG investments,” he said, referring to investments that take into account environmental, social and governance factors.

Even if the fundamental value of the asset does not increase, the supply-demand equation remains, Gupta told Martin Soong at the CNBC Evolve Global Summit on Wednesday.

Responding to the question of whether sustainable investing is just a trend or if it is a long-term strategy, the CEO suggested that, in any case, investing is likely to fall. generate good returns.

If you were to create a basket of ESG stocks, you would usually pick high performing companies anyway, and that’s not a bad investment profile to have.

Piyush Gupta

CEO of DBS Group

“You can’t get too far away by being in… a basket of ESG assets, just because there is going to be a trillion dollars more in that asset class,” said Gupta, ESG Board member. from CNBC. “If nothing else, it will drive up the prices.”

Another good omen for sustainable investing is that companies that focus on ESG “tend to be high performing companies,” he said.

“Therefore, if you were to create a basket of ESG stocks, you would usually choose high performing companies anyway, and that’s not a bad investment profile to have,” he added.

“Clear” interest in sustainability

Gupta said investors – both private and institutional – are starting to choose investments that are socially responsible or that promote environmental sustainability.

“A lot of clients want to be able to express a choice in terms of the types of investments they want to make,” he said.

“It’s even more visible in the institutional investor space,” he said, noting that sovereign wealth funds often have policies on sector choices and where they want to put their money.

It remains to be seen, however, whether investors will always choose sustainability if the investments have not performed well.

“In many cases, people are happy to become ESG if they can get at least the same market return as a non-ESG investment – but it’s unclear how many of them will be willing to compromise and opt for a lower product yield, “Gupta said.” This remains to be tested. “

Corporate governance

Speaking at the same CNBC Evolve panel, Li Yimei, CEO of China Asset Management, said that over the past decade or so, there has been a great improvement in corporate governance and the way shareholders are valued in China.

Li, who is also on CNBC’s ESG Council, said state-owned companies now regularly engage their investors and senior executives speak to small investors through social media and conferences.

“We think we have seen progress,” she said.

DBS’s Gupta agreed, but said there were still gaps in Asia.

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Discussing the perception that public companies in Asia have not always focused on benefiting their shareholders, he questioned whether corporate governance is only about investors or whether it extends to others as well. stakeholders.

“Frankly, the rest of the world is going now – a recognition that… you have to make sure that you have a responsibility to other communities, corporations (and) taxpayers,” he said.

The idea that corporate governance is only about shareholders is changing, Gupta said.

“The column is changing, and in the… changing column, a lot of Asian companies are not doing too badly,” he said.

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