An offshore wind farm in Zhuhai, Guangdong province. (ZHOU GUOQIANG / FOR CHINA DAILY)
Investors are interested in ESG (environmental, social and governance)-themed investments while more capital has been flowing into related sectors, as more governments around the globe are committed to protect the environment, according to Standard Chartered Bank Hong Kong.
A survey showed that 61 percent of the high-net-worth individuals are interested in investing in ESG-themed investment, with 42 percent indicating that they would allocate 5 to 15 percent of their capital to relevant sectors over the next three years, and 32 percent saying they would invest 15 to 25 percent, Standard Chartered Bank Hong Kong said on Wednesday.
A survey showed that 61 percent of the high-net-worth individuals are interested in investing in ESG-themed investment, Standard Chartered Bank Hong Kong said on Wednesday
With many countries pledging to meet ‘net-zero’ commitments by 2060, the overhaul of energy and infrastructure will support the growth of ESG investment-related stocks such as renewable energy, electric vehicles and sustainable food over the next 30 to 40 years.
ALSO READ: ESG attracting more PE interest, set to grow, says Bain report
However, the soaring inflation level and a shortage of semiconductor chips will bring volatility for those ESG-themed stocks in the short-term period, according to Danile Lam, senior cross-asset strategist for Standard Chartered Bank Hong Kong.
Despite expectations that US President Joe Biden's fiscal policies would revive the economy at the beginning of the year, growth stocks still underperformed as capital is flowing from these stocks. Price-earnings ratios for some ESG investment-related stocks are expected to fall sharply from around 100 times at the end of last year to around 40 times currently, sending valuations to normal levels, Lam said. He said he believes it may take a few years for the underlying stocks to return to their earlier valuation highs, as the more mature the market, the more stable the share price rises will be.
As the market concerns over possible tightening of monetary policy by the US Federal Reserve and indications from China that it was controlling over unreasonable commodity price increases, investors rotate their capital allocation favoring those growth stocks with low valuations, Lam added.
READ MORE: How to find investment opportunities in China ESG