SINGAPORE – The asset management industry here has a key role to play in decarbonisation and financial assets digitalisation, two areas of the changing global economic dynamics, said Monetary Authority of Singapore (MAS) chief Chia Der Jiun.

Investment managers can lead the efforts in the areas, he said, noting that they are well placed to do so as they have always been at the forefront of change, a constant in finance and asset management.

“Your business strategies and investment decisions need to respond to geopolitics, growth and inflation developments, economic policy, trade and investment flows, technological disruption, climate risk and action,” he said at the opening session of an investment conference on March 27.

The Imas Investment Conference 2024, held at the Parkroyal Collection Marina Bay hotel, is organised by the Investment Management Association of Singapore (Imas), a representative body of investment managers. Founded in 1997, it has since spearheaded the development of the industry by fostering ambitious standards of professionalism among practitioners and creating public awareness.

Its investment conference has consistently drawn an average of 1,000 attendees annually since 2018, with C-suite executives comprising 80 per cent of that.

In her welcome address, Ms Jenny Sofian, chairman of Imas and chief executive of Fullerton Fund Management, said that in today’s volatile landscape, the imperative for asset managers to drive positive change has never been more pronounced.

Mr Chia said the asset management industry in Singapore is well placed to respond to these changes, seize opportunities and help shape the future in Asia and beyond.

He said Asia’s growth remains a compelling story, and asset managers can play a significant role in allocating global capital to support the region’s growth and help meet the region’s investment and retirement needs.

He said asset managers can generate more interest and demand for sustainable investment, while supporting economic development and decarbonisation in this region. Asset and fund tokenisation is also an opportunity to deepen liquidity and generate business value, he added.

Citing a recent KPMG study, the MAS managing director said total assets under management (AUM) grew at an annual rate of 14 per cent in Asia from 2011 to 2022, beating the global average of 9 per cent.

“This has been driven by the region’s growing wealth and affluence in the retail segment, as well as diversification by global institutional investors into the region,” he said.

Mr Chia said wealth in the region is expected to continue growing in the years ahead, largely driven by the rising middle-class population in Asia, which is projected to rise from two billion in 2020 to 3.5 billion by 2030.

While AUM in Singapore have grown steadily in the past decade at an annual rate of 12 per cent, asset managers currently manage a relatively small fraction of the region’s total investable assets.

“There is much scope to channel growing family wealth, middle-class savings and institutional assets in Apac (Asia-Pacific) into investments. In addition, continued growth in pension assets and retirement savings will also provide more opportunities to deploy long-term capital into alternative and private market investments,” Mr Chia said.

Asset managers can also make a significant impact to Singapore’s decarbonisation journey by developing and implementing transition plans in support of their net-zero commitments, he added.

Mr Chia said many asset managers have taken steps to improve disclosures of their environmental, social and governance (ESG) strategy and methodology.

“The underlying demand for ESG funds continues to be strong, but for the sector to grow sustainably, providing confidence to investors through transparency and governance will be key,” he noted.

Globally, sustainable investing has gained traction, despite political attention, mixed financial performance, and concerns over greenwashing – when businesses portray themselves as being more sustainable than they actually are. Global ESG assets surpassed US$30 trillion (S$40.5 trillion) in 2022 and are on track to surpass US$40 trillion by 2030. Assets held in sustainable bond-focused funds also reached a record US$41 billion in 2023.

Mr Chia said regulation also contributes to strengthening confidence in ESG funds.

In 2022, the MAS issued guidelines that require funds sold to retail investors under an ESG label to provide relevant information and disclosures to substantiate the label. In December 2023, the MAS worked with industry players to issue a code of conduct for ESG rating and data product providers.

In October 2023, the MAS also consulted the industry on a set of proposed multi-sector guidelines on transition planning to a low carbon economy.

With an eye on the future, the MAS has also been working with the industry to help digitalise finance in Singapore.

Mr Chia said: “Asset tokenisation has the potential to streamline processes, improve efficiency, reduce costs and risks in asset and portfolio management.”

Tokenised securities and financial assets and tokenised funds can be bought or sold and settled instantaneously against tokenised money or digital currencies. Tokenisation facilitates automation or elimination of operational processes via smart contracts – a computer program to automatically execute, control or document events and actions according to the terms of a contract or an agreement.

Mr Chia said that within the asset management industry, there is potential for a market for tokenised funds to develop here in Singapore.

He said UBS Asset Management is already piloting the digital native issuance of variable capital company (VCC) funds to simplify the traditional fund issuance process. This will also streamline the distribution and secondary market trading of fund shares through the elimination of intermediaries and traditional administrative steps.

Meanwhile, asset manager Schroders and fund tech firm Calastone are tokenising a VCC fund and recording the ownership of fund shares on a shared ledger. When tokenised investment vehicles are recorded on the same ledger with other assets or money tokens, this enables atomic and instantaneous settlement, enhances operational efficiency, and reduces settlement risks.

Mr Chia said: “To support fund tokenisation pilots as they move towards the commercial phase, MAS is working with these pilot managers on the legal and regulatory treatment and implications of tokenised investment funds.”

He said the MAS is also working on developing the infrastructure for asset tokenisation on a commercial scale together with international partners – both public and private sector.

Correction note: This article has been edited for clarity.