Interest in sustainable investing is increasing, but there are knowledge gaps to contend with, a study finds.

Investors in Asia are looking to increase the share of sustainable investments in their portfolios to an average of 19 per cent over the next three years, with Chinese investors leading the way with an expected allocation of 23 per cent by 2021, a study says.

A study by Standard Chartered Private Bank surveyed affluent and high net worth investors in Singapore, Hong Kong, China and India to determine their motivations behind sustainable investing and how well they understand it. While it showed a willingness to push up such investments, it also found that there is a gap in knowledge about some of the terms involved.

Despite 86 per cent of investors saying they are invest in sustainable ways, the study said there is also a “significant knowledge gap” among survey respondents about what the term “sustainable” investing entails, as well as the returns and impact it can deliver.

Among the value-seeking millennials - most prominent in China and India - 64 per cent expect yields from sustainable investments to be higher than mainstream investments. Altruistic investors, largely comprised of the Gen X, are more willing to accept a financial trade-off between doing good and generating returns.

“While the millennials have been associated with driving the sustainable investing trend in Asia, we see more mature investors are also coming to the fore, motivated by the desire to leave a legacy for the next generation,” Vic Malik, head of investment advisory, private banking, ASEAN & South Asia (ASA) and Global South Asia Community (GSAC), said.

On average, more than 50 per cent of those surveyed are currently involved in philanthropic work, among which 82 per cent would consider shifting their allocations into sustainable investing. This could be facilitated by offering investment opportunities with demonstrated reach and impact, in areas aligned with their charitable causes.

The bank is partnering this year’s Asia-Pacific Venture Philanthropy Network Conference, held this week in Singapore.

The study was commissioned by the bank and carried out by Agility Research & Strategy. Fieldwork was conducted in April across China (Beijing and Shanghai only), Hong Kong, India and Singapore with 421 investors with a minimum $1 million in investments (excluding real estate).

The rise of sustainable investing has become a regular talking point in the wealth management industry. There remains debate on whether these approaches surrender returns because of ethical/financial tradeoffs or whether ESG [environmental, social and goverance] approaches are just smarter investing in the long run anyway. A recent survey of US asset managers by Cerulli Associates, the analytics firm, showed a rising percentage of asset managers look at environmental, social and governance factors alongside more traditional financial tests to identify opportunities and risks. And another report by Boston Consulting Group and MITSloan Management Review found that investments that deliver financial results are closely correlated with those that are deemed sustainable (Investing For A Sustainable Future, 11 May 2016). Separately, a study by Barclays found that investment-grade bonds with higher ESG scores outperformed those with low ESG scores between 2007 and 2015 (source: MSCI).

There remain causes for concern. A 2016 report by EY for example, has flagged the challenge of “stranded assets”, such as oil and gas production facilities that become side-lined because of rising hostility to fossil fuels and divestment from carbon dioxide-producing sectors. (That report mentioned that in 2014, there was the Montreal Carbon Pledge signed by 92 institutions managing $6 trillion in assets, and the Global Investor Statement on Climate Change signed by 347 institutions managing $24 trillion.)