DBS Private Bank has launched a new tranche of its MSCI EM Asia ESG Leaders Outperformance Trade (ESG Outperformance Trade).
The ESG Outperformance Trade takes a long position on the MSCI EM Asia ESG Leaders Index while going short on the MSCI EM Asia Index from which it is derived.
According to a statement released by DBS, the Trade seeks to demonstrate that ESG investing improves the risk-return characteristics of a portfolio and ultimately generates superior returns.
The new tranche is structured as a three-year outperformance warrant with a 15% cap on maturity payoff, and is available to accredited investors from DBS Private Bank and DBS Treasures Private Client at a minimum notional investment of US$500,000 ($679,053).
The relaunch follows the bank’s first ESG Outperformance Trade, which was the first of its kind in Asia when introduced in August 2018.
The Trade received $95 million over seven tranches, and has clocked an average performance of 14% since its launch. It has since delivered an average return on investment of 135% as of Oct 13, 2020. Over 75% of clients have since exited the Trade to take profit.
The tranche will be open till Nov 10, 2020.
“This offering represents DBS Private Bank’s confidence in the ESG proposition’s potential to ride out market uncertainties and outperform in the long-term,” says Subhra Chatterjee, team lead of product management in equities at DBS Private Bank.
“By designing it as an outperformance trade, it functions as a pure play on ESG – giving clients exposure to the alpha of ESG investing, whilst being immune to the beta of the broad market,” Chatterjee adds.
Separately, the bank conducted a group survey among over 60 participants in Asia Pacific between August to October 2020. The survey found that 98% of respondents have a positive outlook on ESG investment and believe it to have benefits such as positive social impact, financial outperformance and resilience to market shocks.
The findings add that while only 40% of respondents own ESG investments currently, there is ample room for this figure to grow over time as 77% indicated that they intend to increase their exposure to ESG investments over the next three to five years.
“Covid-19 has accentuated many ESG issues, turning them from invisible to visceral, from barely existent to existential. The focus on ESG issues is here to stay, from investments delivering both financial as well as ESG returns, to society’s raised expectations and scrutiny of corporate practices and behaviours,” says Joseph Poon, Group Head of DBS Private Bank.
