Inflows surge 480% since MPFA’s landmark ESG initiative

3 June 2024

Sun Life dominates MPF’s “new normal” landscape

Key points are as follows:

  • MPFA issued its Principles for Adopting Sustainable Investing in the Investment and Risk Management Processes of MPF Funds  (“Principles”) to assist MPF trustees integrate ESG factors into the investment and risk management of MPF funds.
  • MPFA Chairman Mrs Ayesha Macpherson Lau also asserted that “sustainable investing will become the ‘new normal’ in the financial industry”.
  • Since the MPFA issued its Principles in November 2021, the MPF system has seen ESG net inflows grow from 1% of MPF’s total net inflows to 5% (as at the end of Q1 2024), a 480% increase.
  • Within MPF, a total of HK$714m was invested in ESG funds in the first quarter of 2024 with Sun Life’s MPF Global Low Carbon Index Fund attracting approximately $469m (or 66%) of ESG’s total net inflows in the quarter.
  • MPF Ratings positively reaffirms the MPF member outcomes MPFA’s sustainable investing Principles are delivering and that Sun Life’s MPF Global Low Carbon Index Fund continues to set new standards for ESG metrics and targets.

MPF Ratings Limited, Hong Kong’s independent provider of MPF pension research, views and education today released a number of key findings following its latest review of the MPF system’s ESG credentials, some two and a half years after the MPFA launched its “Principles for Adopting Sustainable Investing in the Investment and Risk Management Processes of MPF Funds”, an occasion that MPFA Chairman Mrs Ayesha Macpherson Lau took to proclaim that “sustainable investing will become the ‘new normal’ in the financial industry” and a sentiment which Francis Chung(叢川普), Chairman of MPF Ratings Ltd echoed, believing the MPFA’s newly minted Principles were possibly the single most significant initiative as MPF heads into its newly digitized eMPF world and beyond.

According to Mr Chung, since the MPFA announced its Principles MPF’s ESG assets have seen an almost three-fold increase from $3.74bn as at 31 December 2021 to $14.67bn as at 31 March 2024 (See Chart 1), with quarterly total ESG net inflows reaching $714m in Q1 2024.

“When the MPFA announced its sustainable investing Principles, ESG assets accounted for only 0.3% of MPF assets. Today, ESG assets account for 1.2% of total assets, an 290% increase while quarterly ESG net inflows now account for about 5% of total net inflows, a 480% increase in just over 24 months. Strong growth for a nascent asset class.”

When asked which MPF schemes were the big winners as sustainable investing begins to gain relevance within the MPF system, Mr Chung pointed to Sun Life Rainbow’s MPF Global Low Carbon Index Fund’s momentum and dominance, being the first low carbon MPF fund in the market and having attracted approximately $469m, or two thirds, of MPF’s Q1 2024 ESG net inflows (See Chart 2). 

“The MPFA’s sustainable investing Principles challenge MPF sponsors and trustees to not only ensure their investment managers identify, assess and manage relevant and material ESG factors, but their accountability is also heightened because they must also establish and disclose explicit metrics and targets. Sun Life’s MPF Global Low Carbon Index Fund has clear metrics, explicitly targeting 50% reductions in carbon emissions and fossil fuel reserve intensities and 20% uplift in ESG ratings, while excluding companies in sensitive business areas. Its dominant share of fund inflows demonstrates that MPF members are supportive of ESG funds that are willing to hold themselves accountable through clear metrics and targets.”

Chart 1: MPF’s ESG fund asset growth since Q4 2021

Source: MPF Ratings

Chart 2: Net inflow share of MPF’s ESG fund total net inflows for Q1 2024

Source: MPF Ratings

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