Standard Chartered’s Sustainable Banking Report 2022: Mobilising Retail Investor Capital shows Kenya has a potential to mobilise a USD19 billion of retail investor capital into sustainable investments, which could help meet ESG priorities in growth markets.
As the largest and most advanced economy in East and Central Africa, Kenya is often considered a key investment hub in the region. Wealth in Kenya is on an upward trajectory, and the country is now home to East Africa’s largest stock market in terms of market capitalisation. Within Africa, Kenya is also leading the way on green finance.
The growth of the green bond market in Kenya and across East Africa is mobilising private sector investments in support of climate-resilient infrastructure and affordable eco-housing. Recent institutional efforts to encourage private sector participation in Kenya’s sustainable investment ecosystem has helped put it on course to achieve full transition to clean energy by 2030. Beyond energy transition, Kenya’s retail capital potential could also be directed toward combating market specific ESG issues such as food scarcity, poverty, and human rights.
Investors in Kenya expressed relatively strong interest in sustainable investments. Their main motivations for investing in sustainable investments were to ‘help restore the environment’ to ‘create a positive impact. A segment of High Net Wealth investors were also looking to ‘enhance their financial returns’. Most investors are influenced by data and convenience in their decision-making process. In addition, they highlighted that key barriers they faced toward sustainable investments were the lack of information in assessing the impact of sustainable investments on ESG issues, as well as difficulties in comparing sustainable investments opportunities within the same asset class or accessing sustainable investments opportunities without a financial advisor.
“We know that a rapidly growing number of our clients want their investments to make a positive impact on the environment and in society, and there is significant appetite to take ESG investment from a niche play to a mainstream investment strategy. As a bank, we have the expertise and solutions to help investors achieve both profit and purpose. Importantly, we need to enable the shift now for a more sustainable future,” says Paul Njoki, Head of Affluent Banking and Wealth Management in Kenya & East Africa.
The report, commissioned by Standard Chartered and prepared by PwC Singapore, provides a view on the potential retail wealth that could potentially be channelled into sustainable investments by 2030, and identified 10 growth markets, five investor personas as well as three winning themes that would be key in unlocking this potential. The study is based on an analysis of qualitative and quantitative information from various sources, including historical and forecasted net personal wealth and GDP data, as well as sustainable investment adoption rate in advanced economies to form an estimation of the 2030 retail sustainable investment potential across the 10 growth markets.
Across the 10 markets surveyed – Mainland China, Hong Kong, Taiwan, South Korea, Singapore, Malaysia, India and the UAE, Nigeria and Kenya – the report found that the top ESG-related issues these markets face (climate change, pollution, poverty, corruption, food scarcity and energy security) correspond to the areas that retail investors are most interested in countering. Earlier research from Standard Chartered highlights a USD95tn climate transition finance gap which could be bridged in part through sustainable investments.
Mainland China could potentially mobilise USD5.6tn in sustainable investing by 2030, shows the report. With the growing prevalence of climate- themed funds in the market and 42 per cent of investors in Mainland China looking to invest to counter climate change and carbon emissions, this capital could play a sizeable role in helping Mainland China meet its net zero targets.
“In India too, investors have similar motivations with almost 40 per cent looking to address climate issues while in Kenya and Nigeria, where a just transition is top of mind, close to 50 per cent of investors want to help restore the environment,” Marc Van de Walle , Global Head, Wealth Management at Standard Chartered.
Beyond sustainable investing, the research also looked at investors’ interest in the broader ecosystem of sustainable banking products, such as sustainable deposits, sustainable credit cards and green mortgages. While USD8.2tn could potentially be mobilised via sustainable investments, many barriers need to be overcome to make it a reality.
“Individuals have the power to be catalysts for change. Our research shows that US$8.2 trillion of retail investor wealth could flow into sustainable investments if we remove the barriers that are holding them back,” added Mr Njoki.
