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Appetite for impact investing declines as markets fall
Less than half of investors in Singapore willing to sacrifice returns to create positive impact
Tom King 2 Apr 2024

Investors in Singapore are less willing to give up returns to create a positive impact on the environment and society, although they still believe they can gain competitive returns over time if they invest responsibly, a new survey finds.

Results of the survey by American Century Investments, which manages US$240 billion in assets globally, reveal a drop in interest in impact investing globally.

In Singapore, 47% of respondents said they were willing to sacrifice returns to create a positive impact in 2023, a decline from 54% registered in 2022.

The survey, undertaken in December 2023, measured how attitudes to impact investing have changed over time. Survey results go back to 2016 in the United States, 2019 in the United Kingdom, 2020 in Germany, 2021 in Australia, and 2022 in Singapore.

The appeal of impact investing fell 5% in Singapore between 2022 and 2023, the same as in the UK. It declined 6% in Australia, 4% in Germany, and by the smallest fall of 1% in the US during the period.

Rational choices

While the appetite for sustainable investing is down, the survey finds that 58% of impact investors in Singapore are willing to sacrifice up to 10% of returns to have a positive impact in their chosen area, while 85% are willing to give up no more than 15%.

“A willingness to give up as much as 10% of an expected return shows that impact investors expect to earn competitive returns and are making rational choices to make an impact but also seek a financial return,” says Sarah Bratton Hughes, senior vice-president and head of sustainable investing for American Century Investments.

“In earlier times, impact investors often thought they had to accept lower returns to have a bigger impact, but our impact investment strategies help to identify impact-related factors that could improve a company’s ability to stay competitive long term, and potentially add to returns,” she says.

Respondents in Singapore said the market environment positively impacted their willingness to allocate to impact investing (37%), surpassing the trend in Australia (13%), Germany (15%), the UK (16%), and the US (22%). Market conditions had a negative impact on the willingness to allocate to impact investing for roughly three in 10 investors in each of the five countries.

Healthcare versus the environment

Across the five countries, healthcare was the top concern for investors, with the environment falling to second place after holding the lead in 2020.

However, in Singapore, the environment and healthcare were equally top impact concerns for investors at 24%, while racial equality concerned 11% of impact investors, the highest of the five countries surveyed.

“We can conclude from this report that the interest in impact investing does not exist in a vacuum; investors rationally look at the big picture and if markets fall, then the appetite to make an impact seemingly falls too,” says Bratton Hughes.

“Ongoing market volatility and persistent inflation have investors’ minds focused on returns rather than on the impact of their investment. Investors are facing an increasingly challenging geopolitical landscape and the decision to allocate to impact investing is made as part of a mix of considerations.

“Nonetheless, there is still a strong willingness overall to sacrifice some returns for the benefits of investing in impact funds,” she adds.

American Century itself has a unique perspective on sustainable investing with more than 40% of the asset managers’ dividends going to the Stowers Institute for Medical Research, a world-class biomedical research organization with an equity stake in American Century. American Century Investments has generated more than US$2 billion in dividends for the Stowers Institute since 2000.

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