Sustainable investing is no exception in taking a hit from a market downturn but investors in the area are disciplined so as to benefit from opportunistic chances, says Pierre DeGagné (pictured), head of funds selection at DBS Private Bank.

It’s a new year but the downbeat mood across global markets remains. Worries over slowing growth amid rising interest rates and a trade conflict persist among investors reeling from the worst year for global equities since the financial crisis in 2008.

Environmental, social and governance (ESG) investments are typically located in volatile sectors such as mid-caps and emerging markets which could leave investors more exposed to the market momentum; however it also means they are taking a longer-term view on capital as they incorporate ESG-related potential risks and opportunities.

“Investors who have made the shift towards sustainable investing hold a long-term structural view – they recognise that ESG-compliant companies that address key societal issues are well-placed to generate a competitive advantage over their peers and deliver attractive financial returns in the long term,” said DeGagné.

Calling investors making sustainable investments "steady and disciplined" compared to speculative short-term traders, DeGagné also pointed out how unfavourable market conditions can offer opportunities to them.

“In times of tough markets, sustainable investors stand to benefit from extremely opportunistic chances to gain exposure to some of the most important companies for the next generation, such as those that are addressing and solving critical social and environmental problems of today and tomorrow.”

Sustainable investing is increasingly moving into the mainstream. More than 860 live structured products that are linked to over 80 ESG criteria-related indices have an estimated volume of US$6.9 billion, according to SRP data. Around US$5.7 billion worth of sales volume was generated from products with a tenor of over six years.

* live products as of Jan 03, 2018

Source: StructuredRetailProducts.com

ESG investing in Asia, however, still has a long way to go, according to DeGagné.

“There is a misconception amongs some investors [in Asia] that ESG investing requires compromising or giving up financial returns,” he said. “ESG investing isn’t the same as philanthropy. It’s not driven simply by the want to ‘do good’ – what it seeks to do, is to generate both a positive societal impact and financial returns.”

DBS Private Bank has been at the forefront in offering ESG products to its clients. Some high conviction funds they have on-boarded include Parvest Global Environment managed by BNP Paribas. The fund focuses on investing in companies that operate in environmental markets such as water waste, alternative energy and waste management.

DBS has also partnered up with First State to add governance criteria-compliant funds, while rolling out structured products tracking sustainability-related index.