New Research: Responsible investing can create framework for family businesses and family offices in Asia to pass on wealth

Campden Research

New Campden report Responsible Investment in Asia says region on cusp of transformation in responsible investment Government regulation and corporate initiatives driving trend.
LONDON and NEW YORK, May 3, 2011 – Responsible investing can help family businesses and family offices in Asia pass on wealth to the next generation, by avoiding hidden risk and focusing investments on sectors with future potential, according to a new study by Campden Wealth and the River Star Foundation, Hong Kong. These sectors include the low-carbon economy, water supply, education and health, the report says.

The study, Responsible Investment in Asia, provides an overview and outlook for responsible investment in the region, with recommendations for family businesses and family offices looking to integrate RI into their investment activities. Campden, with offices in London, New York and Singapore, provides proprietary research, conferences and other information services to financial and business-owning families and their family offices and advisors worldwide.

"Although responsible investment has gained little traction in Asia so far, the region is on the cusp of transformation. Rapid social change, government regulation and corporate initiatives related to the environment, sustainability, and health and safety, are drivers reinforcing this trend,” said David Bain, Campden director of research. “Increasingly, the philosophy behind responsible investing is informing the decisions of businesses and governments in the region. It is an idea with real relevance to family investors.”

According to the study:

  • The global market of responsible investment assets under management is around $5 trillion, with companies in the US, UK and Switzerland managing most of these assets. Asian expertise in the area is still in its nascent form, controlling less than 10% of assets under management.
  • The responsible investment universe is predicted to grow annually at a rate of about 25%, with the market expected to total more than $25 trillion by 2015. Asia will drive much of this growth.
  • The local investment universe is expanding rapidly, opening the door to those looking to invest in local listed companies. Asia-Pacific companies now comprise more than a third of the Dow Jones Sustainable Investment Index (DJSI), the most quoted benchmark to measure investment performance of firms committed to environmental, social and governance (ESG) principles. In the last two years, 70% of initial public offerings in the clean technology sector were in Asia. As with their listed counterparts, family businesses in the region are adopting ESG principles to sustain their companies over the long term.
  • Responsible investment is no longer a specialist discipline of interest to a limited circle of investors, but has established itself as increasingly mainstream and capable of delivering healthy returns. Benchmarks, indices and reporting are becoming more standardized, allowing investors to judge investment performance. Funds that operate in these areas increasingly are able to demonstrate a track record. Responsible investing that incorporates sustainability screening is also becoming a way to manage risk in volatile times.
  • A responsible investment approach can create a resilient framework to pass on wealth to the next generation by “future-proofing” investment strategy: highlighting hidden risks and focusing on areas with long-term potential. However, family businesses and family offices entering the sector need to invest time and effort into developing a coherent strategy, putting in place adequate screening processes to determine appropriate investments.

For many financial families and family offices in Asia, the nearest they come to an RI approach currently is through their charitable and philanthropic activity, the study says. The report outlines the following strategies for those looking to increase their focus on responsible investment.
•    Community investing, or microfinance, as a way to direct cash to communities underserved by traditional financial services.

•    Thematic investing in companies addressing megatrends such as climate change, population growth and resource constraints. However, many companies in the green or renewable sectors are fairly small, making investment a riskier proposition. To reduce these risks, another option is to invest in funds that focus on particular themes. Many of these funds are increasing their focus on Asia, the study says.

•    Project finance as a less risky option. According to the study, there will be huge opportunities to invest in projects in Asia as renewable energy is rolled out across the region. China is currently the biggest market for renewable power project financing, with 44% of all global deals in the second quarter of 2010.

•    A best-in-class approach, adding value to existing asset allocations by systematically identifying high-growth sustainability themes and best-in-class companies.

“Responsible investing is not only an opportunity for investors in Asia, but a reality that reflects the urgent need for this part of the world – home to two-thirds of the world’s poorest, yet poised for massive growth in the next decades – to manage its development in a responsible and sustainable manner,” said Annie Chen, Founder of the River Star Foundation. “Family businesses and family offices can play an important role in making responsible investing a more established trend in Asia, thereby helping to assure us all of a more sustainable future”.

Michelle Manoff                                                   David Bain
Rubenstein Public Relations                             Campden Media
212-843-8051                                                       +44 (0)20 7214 0585                    

Campden Wealth
For over a decade, Campden Wealth has supported family businesses and wealth holders by operating at the forefront of innovation and best practice in wealth management. We provide unrivalled knowledge and intelligence to principals of ultra-high net-worth individuals and business owning families, as well as family office executives and trusted advisers. Our breadth of understanding of the multidisciplinary family enterprise is derived from facilitating peer-to-peer networking events and from producing ground-breaking research and editorial products – including the quarterly publications Campden FB and Campden FO and Research Reports on a host of issues concerning family businesses and the ultra-high net worth.