Thai ESG funds' asset value jumps to B34bn

Thai ESG funds' asset value jumps to B34bn

The asset value of Thai sustainability mutual funds leapt to 34 billion baht as of last month after tallying 22 billion last year, which was a fourfold increase from 2019, as growing environmental awareness and environment, social and governance (ESG) investments lure investors with the promise of high returns.

Over the course of two years, investors have gained interest in ESG funds because sustainability is believed to be a key factor leading businesses to prolonged growth, according to Morningstar Thailand Research.

The spike in the funds' asset value was mainly due to the influx of new open-end funds that received positive feedback from investors.

The funds have seen a significant inflow of capital since 2019 when 3.1 billion baht entered the funds, before recording a fourfold increase in 2020 with net inflows of up to 15 billion baht.

Inflow tallied 11 billion baht in the first two months this year.

In terms of assets in the funds, global equities still make up the majority, at 63.5% of total asset value.

Only 4.1% of the funds are invested in Thai large-cap stocks.

According to Morningstar, the disparity may be because of stronger growth of investments in foreign ESG funds, which provide more varied investment options with clear performance track records.

ESG funds in Thailand are still in the beginning stages with limited products.

The three largest Thai ESG master funds are Baillie Gifford Positive Change, BGF Sustainable Energy and Janus Henderson Horizon Global Sustainable Equity.

All three master funds were affected by the pandemic in early 2020, but the Baillie Gifford Positive Change fund showed a huge jump in returns.

This is partly because the fund was holding Tesla shares as prices continued to appreciate throughout 2020 and it focused on other high-growth stocks. However, the fund is considered riskier than the other two.

Morningstar said US sustainability funds continued to set new records in 2020, with total net inflows to open-end funds and exchange-traded funds reaching US$51 billion, compared with $21 billion in 2019, an increase from $5.4 billion in 2018.

The influx of capital drove US ESG funds' asset value to spike to $240 billion in 2020, an uptick of 70% from 2019.

Capital inflow to global ESG funds accounted for 24% of equity and bond fund investment in 2020, while in the past it contributed less than 1%, demonstrating a growing interest in sustainable investment as the future trend, said Morningstar.

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