Key Takeaways:

  • Endowus has launched Asia’s first ESG (Environmental, Social and Governance) advised portfolios which allows you to invest in multi-asset sustainable portfolios
  • These portfolios are made up of best-in-class ESG funds from top award-winning, experienced ESG asset managers, invested in a passive strategic asset allocation according to Endowus’ investment philosophy
  • Endowus has secured exclusive access for SGD-denominated or hedged, institutional share class funds with 100% trailer fee rebates - facilitating access to ESG products at the lowest achievable cost
  • ESG offerings are a result of a rigorous selection process by the Endowus Investment Office that reviewed hundreds of funds utilising the leading global ESG assessment frameworks to select the best ones

If there was one thing that we took away from the COVID-19 riddled year that was 2020, it was the vulnerability of our society to external shocks and that of life itself. The rising racial and social discontent, massive economic dislocations, and financial inequality have brought the issues of social justice, health, and wealth to the fore. Combining that with an increasing global  awareness of the long term degradation of our environment has led to renewed reflection on how we as investors can play a role in making the world a little bit better.

Consistent with these priorities, a recent survey conducted by Endowus showed that many of us feel strongly about ESG (Environmental, Social and Governance) investing. Notably, while some or all aspects of ESG investing resonate with more than 93% of respondents, only 28% of all surveyed held some form of ESG investments.

Endowus was started to help people make the most out of their money, enabling them to live easier today and better tomorrow. While historically the focus has been on better advice, greater access, and lower cost, we find ourselves uniquely positioned to respond to the growing demand for better sustainable investing options in Singapore. Hence, we have launched Asia’s first digital multi-asset ESG portfolios for retail investors that are designed for you and our collective future.


The Endowus ESG Portfolio

Best names in sustainable Investing

Curated from award-winning global fund managers, who are pioneers in ESG investing with decades of experience in ESG asset management

Positive impact on the environment and society

Top funds with a mandate of investing in companies that contribute to UN Sustainable Development Goals (SDGs)

Industry-first truly diversified ESG offering

Globally diversified, multi-asset and multi-manager portfolios, comprising of equities and fixed income products so that you can invest based on your risk tolerance

SGD-denominated or hedged ESG funds

Reduce or eliminate unnecessary FX transaction cost and exposure

Access Institutional share class funds, or 100% trailer fee rebates

Expect access to best-in-class products at the lowest cost possible, with aligned advice

GET ESG PORTFOLIOS

Why ESG and sustainable investing?

More and more investors are coming to the realisation that where we invest our money can make a meaningful difference to our lives and the lives of others. Financial capital allocation determines where the resources of companies, governments and individuals will be deployed, and the secondary impact of this can play a larger role in these allocation decisions.

ESG (Environmental, Social and Governance) investing is an investment practice that takes into consideration the impact of investment on the environment and society at large. It looks at how companies treat the environment and key stakeholders from different parts of the society. Subsequently, ESG investing avoids irresponsible companies and prefers companies that are responsible corporate citizens.

ESG incorporation has now become an investment norm. There is now such momentum behind the idea of responsible and sustainable investment that the UN Principles of Responsible Investing program has grown to over 3000 signatories, investing $100 trillion—and it is still growing. The incorporation of ESG issues into investment analysis and decision-making processes has become a necessary part of investment.

The involvement of the financial sector will be key to channelling capital and fostering investments decisions that are instrumental to paving a better future. Without a strong signal from investors, no significant change in our economic system will be possible.

The growth in UN PRI signatories and assets under management accelerating

Source: UN PRI

A new and better way for sustainable ESG investing

However, while awareness is increasing among investors, and some progress is being made at the institutional level, it's still extremely difficult for individual investors to execute a well-constructed ESG investing plan in Singapore.  ESG investing previously has been a space dominated by institutional investors such as sovereign wealth funds, pension funds and other major investors; over the past few years fund managers also started to distribute some ESG funds to private banks. But it is still a challenge for individual investors in Singapore to have access to enough high-quality ESG equity and fixed income funds to build a diversified portfolio.  In addition, ESG funds have historically been expensive and out of reach to individual investors.

As mentioned above, from our survey result, 93% of the respondents resonate strongly with the idea of ESG investing, but only 28% have some form of ESG investment. Lack of good options, concerns of greenwashing, lack of knowledge were the main reasons why sustainable investing had not been a part of their portfolio. But the other main reason was that there was a sense that in order to do good, we need to make financial sacrifices.

Do we need to sacrifice returns to do good?

Historically the preferred method was to donate through charities and give money away which had a negative return and was often just spent with no ongoing benefit to the donor or the recipient of that donation. By changing the way we invest, there is a growing realisation that we can make financial returns that not only make the world and our society more sustainable, but it also makes the financial capital more sustainable and possibly even grow.

Recent performance of ESG funds and portfolios suggests that we need not sacrifice returns to contribute to a better world. The historical returns for the Endowus ESG portfolio 100% Equity showed an annualised return of 17.1% over the past three years compared to 10.5% of the MSCI All Country World Index, at a lower level of volatility. While admittedly the time frame is short as most of these ESG strategies have not been around long enough to have experienced a cycle, however, it showed resilience and good, sustained performance even during the 2018 correction and the 2020 COVID-19 induced correction.

Endowus ESG Portfolio 100% Equity outperformed the MSCI All Country World Index

Source: Endowus, Morningstar. Performance data is from 1 November 2013 to 28 February 2021, and is calculated with monthly rebalancing. 1 November 2013 was the common inception of the oldest share class of the underlying funds of Endowus ESG 100% Equity. Performance is in SGD, includes the funds’ total expense ratio and does not include trailer fee rebates.

Endowus is the industry’s first comprehensive solution for ESG investing

Since the inception of Endowus, our mission has been to bring institutional-level investment advice and solutions to individual investors in Singapore at the lowest cost achievable. We have pioneered this in CPF investing, and we are bringing this to ESG investing.  At Endowus, investors can now access ready-made Endowus ESG portfolios built with the best ESG, sustainable and climate funds.  The Endowus ESG portfolios are globally diversified, multi-manager,  multi-asset,  customised based on individual investor’s risk tolerance, and available at the lowest cost possible.  

Endowus’ Investment Office have selected 6 best-in-class ESG equity and fixed income funds managed by award-winning fund managers who have decades of experience in ESG investing, and who have developed proprietary and industry leading processes in ESG investing. These managers include J.P. Morgan Asset Management, Natixis Investment Managers-Mirova, PIMCO, Schroders and UOB Asset Management-Robeco.

Access to great products at a low cost

To solve the problem of accessibility, we worked with these fund managers to launch previously unavailable funds that are also Singapore dollar hedged or denominated. To solve the problem of high costs, we rebate 100% trailer fee to investors, and even negotiated  special additional rebates with fund managers to return to investors. In some cases, we also launched institutional share class and clean share classes with no embedded trailer fees with fund managers, to provide the lowest-cost option that’s traditionally only available to institutional investors. We will continue to work with the best global and local fund managers to identify, create and bring into Singapore more best-in-class funds for ESG and general investing.

Endowus works with FMCs to offer exclusive access and cost

Source: Endowus

The first multi-asset ESG portfolio in Asia

The Endowus ESG Portfolios consist of the best-in-class funds curated by the Endowus Investment Office, and is optimised for the best returns at each level of target risk. These risk-targeted ESG portfolios across equities and fixed income is an industry-first offering that’s not available anywhere else. A risk-targeted approach is critical for a disciplined and tailored investment plan because different investors have different risk tolerance depending on their personal situation and circumstances. There is no one-size-fits-all in investing, and each of us deserves a solution that’s the most suitable for us.

Endowus ESG Portfolios are risk-targeted and diversified

Source: Endowus, Morningstar. The “12mth rolling worst” is calculated based on representative historical performance from 1 January 2003 to 28 February 2021. It measures the worst drawdown that has happened to the portfolio over a 12-month period.

We want to help investors achieve their financial goal while aligning their personal values with their investment. With the newly launched Endowus ESG Portfolio, we can finally achieve the possibilities to generate a triple bottom line of good returns and also positive social and environmental impact — doing well and also doing good for profit, people and the planet. The introduction of ESG investing is important to Endowus as it perfectly aligns us to the vision and mission of the company to solve for the greatest problems of wealth and finance: retirement adequacy and now the global issues of social justice and environmental protection that is an essential element of the future of our society. Endowus brings meaningful solutions that make a difference in people’s lives.

Endowus ESG Portfolio construction

Endowus ESG Portfolios are designed in line with our core investment philosophy. As a truly broadly diversified, multi-asset and multi-manager portfolio, it has a balanced allocation to different geographies globally and across the various sectors. It is a strategically passive asset allocation portfolio that will not be making active or tactical asset allocations. This allows the portfolio to be well balanced and provide consistent returns through market cycles. The portfolio seeks out the best-in-class funds to represent the different geographic and sector exposures and optimise the portfolio to take advantage of the long term returns of markets. The investors personal risk tolerance and appetite is reflected in the asset allocation between equities and fixed income.

Endowus ESG Portfolios are globally and sectorally diversified

Left: Equity sector exposure of Endowus 100% Equity ESG Portfolio. Right: Fixed income sector exposure of Endowus 100% Fixed Income ESG Portfolio Source: Morningstar, net exposure rescaled to 100%. Data as of 28 February 2021 for the Equity Portfolio. Data as of 31 January 2021 for the Fixed Income Portfolio.
Left: Country exposure of Endowus 100% Equity ESG Portfolio. Right: Country exposure of Endowus 100% Fixed Income ESG Portfolio Source: Morningstar, net exposure rescaled to 100%. Data as of 28 February 2021 for the Equity Portfolio. Data as of 31 January 2021 for the Fixed Income Portfolio.

Performance and risk of Endowus ESG portfolios

The below two charts show the historical performance of Endowus ESG portfolios and their underlying funds. The analysis begins from the common inception (January 2020) of the underlying funds, including their oldest share class.  ESG equity funds have a longer track record while ESG fixed income funds are much newer, and this is because sustainable ESG investing as an investment practice began in equity investing much earlier and made its way to other asset classes later.

Past return and volatility of Endowus ESG Portfolios and reference indices

Source: Endowus, Morningstar. Data as of 28 February 2021. All returns are in SGD and portfolio returns are net of fund-level fees and do not include trailer fee rebates. Portfolio returns are calculated using monthly rebalancing. Reference indices are calculated using MSCI ACWI NR as a representative benchmark for equities, and Bloomberg Barclays Global Aggregate SGD Hedged TR for fixed income.

Past return of Endowus ESG Portfolio’s underlying funds, and the reference benchmarks

Source: Endowus, Morningstar. Data as of 28 February 2021, and represents historical performance of the fund and its oldest share class. Risk free proxy for Sharpe ratio is 3-month SIBOR rate. All returns are in SGD and fund returns are net of fund-level fees and do not include trailer fee rebates.

The Endowus ESG Portfolios have outperformed the broader markets, as represented by the MSCI ACWI Index for equities and BbgBarc Global Aggregate Index for fixed income since 2020. The Endowus ESG Portfolios have also realised a lower volatility during the same period.

The Endowus 100% Fixed Income ESG Portfolio maintains an investment grade credit on average. The fund managers of each fund would also manage the duration exposure of the fund. The latest data shows that the portfolio is taking less duration risk than the reference global aggregate benchmark, while having exposure to higher-yielding names.

Endowus 100% Fixed Income ESG Portfolios key characteristics

Source: Endowus; JPM, Robeco and PIMCO. Data as of 28 February 2021* Data as of 31 January 2021

Commitment to select best-in-class ESG funds

Endowus investment office leverages data and technology and have built a rigorous framework for manager and product due diligence. In particular when it comes to the ESG funds, unfortunately there is no single way of doing ESG investing and each fund manager has their own philosophy and approach. Therefore, it is even more important that we as a trusted advisor carry out the additional layer of due diligence to understand the ESG framework and process that the managers use and validate it on behalf of our clients.

When we assess an ESG fund, we look at the firm-level commitment to ESG investment and integration, as well as how the strategy is designed to incorporate and take advantage of ESG information. We believe that it is important that the fund manager company is committed and actively contributing to the development of ESG investing, and therefore, on this long term pursuit, continuously building up their infrastructure, acquiring talents, and engaging with companies to promote changes.

The existing ESG fund managers on our platform are all signatories of UN PRI, and were given the highest UNPRI rating A+ in Strategy and Governance in 2020. All of them have more than 20 years history in their ESG investing journey, and are early movers or innovators in different aspects of ESG investing. These fund managers have committed their resources to have built proprietary ESG rating systems so that they could have independent ESG views and do not depend on external third party ratings. Most of them have a dedicated sustainability investment team that focuses on ESG research and engagement, and provides strong support to the investment team.

The ESG funds in the ESG model portfolios have a clear and repeatable investment process that exclude unethical and irresponsible companies, fully integrate proprietary ESG insights in the bottom-up fundamental analysis,  and invest in names that contribute positively to the environment and society. The investment teams are held accountable to such processes by collaborating closely with the sustainable investment team and having to document their investment decision and to give an account if there is any ESG anomaly. There is also ongoing monitoring of the sustainability profile of the funds to make sure they are better than the average market.

We also commit to provide maximum transparency to our clients with regards to our decision making. For more information on why we chose the funds, you can visit the fund rationales for each fund (Mirova Sustainable Equity, Schroder Climate Change, Schroder Sustainable Growth, JPM Global Bond, PIMCO Climate Bond and UOB Sustainable Credit) as outlined below.

Source: Endowus

How to start investing in Endowus ESG portfolios

Endowus ESG Portfolios can be accessed by both  new & existing Endowus clients on either desktop or web app, and mobile app. For new clients you can get going by opening an account at Endowus.com or by clicking on the button below. For existing clients please follow the instructions below:

  1. Simply log in to your Endowus account;
  2. Add a new goal;

3. Select “General Investing”

4. Select “Environmental, Social and Governance (ESG)” and follow the instructions

If you'd like to hear from us personally on the launch of this best in class ESG investment solution, you can watch the launch webinar by Samuel Rhee, Chief Investment Officer, and Yulin Liu, Investment Lead.

WATCH THE WEBINAR HERE

Please reach out to our MAS-licensed Representatives for any questions. You can schedule a live consultation with us or we can also be reached via email at support@endowus.com.

This article has not been reviewed by the Monetary Authority of Singapore.


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