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Standard Chartered shows how to motivate retail investors to finance the climate transition in growth markets

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Standard Chartered’s (LON:STAN) survey of retail investors across key growth markets found that $8.2 trillion in retail wealth can be directed to sustainable investing by overcoming barriers relating to understanding, access and risk/return in the space.

  • Standard Chartered’s 2022 sustainable banking report found that 40% of retail investors surveyed prioritise investing in climate change and carbon emissions.
  • Barriers to sustainable investing cited by nearly half of those surveyed include access to investment products, poor understanding of investment impacts, and a misconception about related risk/return rewards.
  • Improved access to products, data and advice, and providing solutions that match investor ESG preferences could unleash $8.2 trillion in retail wealth towards sustainable investing.

The sustainable banking report provided granular insights into the motivations and inclinations of retail investors in ten major growth markets across Asia, Africa and the Middle East.

Improving access to data, and providing tailored solutions could help mobilise vast amounts of retail investor capital, especially in countries like China and India, but should be accompanied by sound regulatory oversight.

Sustainable banking report 2022: mobilising retail investor capital

The report prepared by PwC Singapore for Standard Chartered was based on a survey of retail investors across ten growth markets, designed to help the bank develop solutions to make sustainable investments a mainstream asset class by 2030.

The survey covered 3,113 individuals in China, India, South Korea, Taiwan, Malaysia, Kenya, Nigeria, Hong Kong, Singapore and the United Arab Emirates (UAE). Top ESG issues identified were climate change, pollution, poverty, corruption, food scarcity and energy security.

Detailed social and behavioural investor traits gleaned across the demographic data gathered was designed to help STAN construct investor profiles to better understand the motivations and challenges faced by retail investors in these markets.

Large investment potential comes with surmountable challenges

Based on the survey conducted by PwC on behalf of STAN, 40% of retail investors across the markets identified, and across various income and socioeconomic groups, considered climate change and carbon emissions reduction a top investment priority.

Rising domestic wealth and the size of their populations made China and India the markets with the highest potential for growth. China alone has the potential to direct $5.7 trillion in retail sustainable investment by 2030, the survey found.

Superior financial infrastructure in established financial hubs like Hong Kong, Singapore and the UAE suggested retail investors had the potential to increase their allocations to sustainable investing as well.

Directing capital towards transition finance could mobilise Kenya’s $19 billion, and Nigeria’s $198 billion in retail wealth, with climate change being a top investment priority there.

Barriers identified by the survey also provided insight into the solutions needed to address investor’s sustainability demand in growth markets. Almost half (47-48%) of the respondents identified accessibility, perceived low returns or high risk, and a lack of understanding as reasons for slow adoption of sustainable investing.

Solutions needed would have to make more solutions available across the market, and preferably on digital platforms, which can provide speedy access, while also enhancing transparency. Advisory services was also a key requirement identified by the survey.

New solutions must not overlook regulatory oversight

The attractiveness of directing retail investment towards sustainable investing in countries in Africa, Asia and the Middle East is that it could help bridge funding gaps in sustainable development in-country and regionally.

However,  care must be taken to provide suitability and regulatory oversight to protect individuals. Additionally, investments must be scrutinised to guard against claims of greenwashing, which can result in products losing their ESG ratings.

Even though suitability has been well established in retail investing in the developed world, and is now part of the new MiFID II requirement in Europe, a recent survey found that many wealth managers in Europe were not addressing their clients ESG preferences.

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