Rising interest rates in the US and Europe are forcing environmentally focused investors to rethink a market long-considered a laggard on everything ESG: Asia.
Asia’s climate and ESG-labeled equity exchange-traded funds are attracting the most inflows versus US and European peers since at least 2010. Fund launches are up. Even ESG funds sold in Europe are steadily increasing their exposure to Asia.
By contrast, investors in comparable US funds are on pace to withdraw $4.3 billion on an annualized basis, as the Federal Reserve’s rate hikes since last March have ballooned to 525 basis points. In Europe, the biggest market for ESG investing, ETF inflows will be just under $2 billion. In China, for example, falling interest rates are prompting investment in solar power plants, according to BloombergNEF. India, where most analysts expect the central bank to keep rates on hold for the foreseeable future, has become a rare bright spot in the onshore wind market. Shares of Indian wind turbine maker Suzlon Energy Ltd.
“The more data we have, the better we can paint an accurate picture of what companies are really doing on the ground in terms of their sustainability integration or management,” said Stephanie Choi, sustainable and impact investing strategist at UBS Global Wealth Management in Hong Kong.
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