medium_Multicoloured dots on black.jpg

small_Multicoloured dots on black.jpg

thumbnail_Multicoloured dots on black.jpg

Multicoloured dots on black.jpg

When the future is uncertain, [diversification is key](link). This has been the mantra of proponents of 60/40 portfolios (60% stocks/40% bonds) commonly known as ‘balanced portfolios', and the bedrock of several strategies adopted both by institutional and individual investors around the world.

But this strategy is not without risk, prompting some investors to question the benefits of this approach.

During the first quarter of 2020, a simple 60/40 portfolio for a US investor had one of the largest drawdowns since the 60s, according to a Goldman Sachs research report. “This followed a decade of very strong risk-adjusted returns for balanced portfolios, supported by a combined bull market in equities and bonds but negative equity/bond correlations,” the report goes.

**Balanced Did Its Job**

Although this typical balanced portfolio had a difficult first quarter in 2020, its returns subsequently improved. And so far this year, the outperformance of equities (on a global basis) has outweighed the poorer returns from bonds.

Performance of 60/40 Portfolio and Correlation of Asset Classes Over Time


![60 40 portfolio.jfif](/uploads/60_40_portfolio_4333852100.jfif)

As Jason Kephart, senior analyst at Morningstar, recently put: “Ironically for the 60/40 doomsayers, those same factors that caused interest rates to spike also spurred strong stock returns that more than outpaced the losses in the bond portfolio.”

This might not come as a complete surprise. In a typical economic recovery, the yield curve tends to steepen, and equity returns usually improve.

**Everything’s Expensive**

Yet the fact that both bond and equity markets are now expensive might puzzle some investors. When valuations are high for both asset classes, prospective returns are low and the risk of drawdown potentially increases. The crash of financial markets last year was a painful illustration.

But this puzzling environment has been around for some time now. Therefore, isn’t there a risk of a higher correlation between bonds and stocks that would undermine a key attraction of a balanced portfolio?

Year after year, the very low interest rate environment created by central banks has forced many investors to increase their risk exposure to find more decent returns. Some even have traded risk for illiquidity and endorsed alternative asset classes such as private equity, real assets (such as infrastructures), higher-yielding asset classes (high yield, emerging debt) or fancier but riskier assets such as cryptocurrencies.

“This temptation to increase exposure to less liquid asset classes to find income and compensate for the lower yield of traditional asset classes is risky,” reminds Clemence Dachicourt, a senior portfolio manager with Morningstar Investment Management Europe. “Over time, bonds have shown they still can play a role in diversifying risk and be a safe haven for portfolios,” she adds.

**Passed the Test**

“The first quarter of 2021 showed that even the worst quarter for U.S. investment-grade bonds in the last 20 years wasn't enough to derail the classic 60/40 portfolio”, says Jason Kephart.

So what’s the take for investors. As long as the correlation between traditional asset classes doesn’t shift dramatically and the portfolio continues to rise over time, then holding a 60/40 portfolio still makes sense.

That doesn’t mean investors shouldn't consider some alternative mixes but perhaps hold those on the margins and keep your core in stocks and bonds. Although, instead of holding broad indexes, they might want to consider diversifying by adding buckets of individual stocks and bonds.

At the end of the day, the most important risk any investor should always think about is the permanent loss of capital and the loss of purchasing power. The 60/40 portfolio still offers the best defence. And even it if did seem to veer off course at one point, it could have been by design.


*©2021 Morningstar. All rights reserved. The information, data, analyses and opinions presented herein do not constitute investment advice; are provided as of the date written, solely for informational purposes; and subject to change at any time without notice. This content is not an offer to buy or sell any particular security and is not warranted to be correct, complete or accurate. Past performance is not a guarantee of future results. The Morningstar name and logo are registered marks of Morningstar, Inc. This article includes proprietary materials of Morningstar; reproduction, transcription or other use, by any means, in whole or in part, without prior, written consent of Morningstar is prohibited. This article is intended for general circulation, and does not take into account the specific investment objectives, financial situation or particular needs of any particular person. Investors should consult a financial adviser regarding the suitability of any investment product, taking into account their specific investment objectives, financial situation or particular needs, before making any investment decisions. Morningstar Investment Management Asia Limited is licensed and regulated by the Hong Kong Securities and Futures Commission to provide investment research and investment advisory services to professional investors only. Morningstar Investment Adviser Singapore Pte. Limited is licensed by the Monetary Authority of Singapore to provide financial advisory services in Singapore. Either Morningstar Investment Management Asia Limited or Morningstar Investment Adviser Singapore Pte. Limited will be the entity responsible for the creation and distribution of the research services described in this article.*



Does the 60/40 Portfolio Still Make Sense?

large_sustainable tomorrow.JPG

medium_sustainable tomorrow.JPG

small_sustainable tomorrow.JPG

thumbnail_sustainable tomorrow.JPG

sustainable tomorrow.JPG

Climate change: investing for a sustainable tomorrow

large_franklin templeton savings.JPG

medium_franklin templeton savings.JPG

small_franklin templeton savings.JPG

thumbnail_franklin templeton savings.JPG

franklin templeton savings.JPG

Saving and Investing are two terms that are often used interchangeably, but they are actually different tactics that go hand-in-hand to help you reach your financial goals. Savings typically are intended for a rainy day or short-term goals, while investing involve an asset purchase that you believe may generate a return over time. Watch the video to learn more.

<iframe style="height:768px;width:1365px;display:block;border:none;margin-left:auto;margin-right:auto;"src="https://players.brightcove.net/802657821001/experience_6103d24a18b4a400253d21ed/index.html" allow="autoplay; fullscreen; geolocation; encrypted-media" allowfullscreen webkitallowfullscreen mozallowfullscreen></iframe>



The Difference Between Saving and Investing

In the second episode of a four-part series, we explore briefly how the pandemic has prompted Singaporeans to kickstart retirement planning. 

"Rethinking Retirement" is a study commissioned by Fullerton Fund Management to find out what Singaporeans think about retirement, as well as how digital technologies and COVID-19 have altered their approach to it. 

Impact of COVID 19 on retirement planning

large_STA0521499128-014_Sustainability-linked bonds_1440x770_asi.jpg

medium_STA0521499128-014_Sustainability-linked bonds_1440x770_asi.jpg

small_STA0521499128-014_Sustainability-linked bonds_1440x770_asi.jpg

thumbnail_STA0521499128-014_Sustainability-linked bonds_1440x770_asi.jpg

STA0521499128-014_Sustainability-linked bonds_1440x770_asi.jpg

Ethical investments have never been hotter. Assets under management in all investment strategies governed by environmental, social and governance (ESG) principles grew more last year than in the preceding decade1.

While many of you will be familiar with the US$1 trillion green bonds market, issuance of other debt securities designed around ESG considerations has been gathering pace.

For example, new social bond issues totalled US$165 billion in 2020, up from US$18 billion in 2019. Sustainability bond issuance hit US$75 billion in 2020, from US$43 billion a year earlier. Sales of both instruments are on track to more than double this year, according to Bloomberg data.2

Much of this activity can be attributed to a combination of regulatory pressure, rising corporate awareness and investor demand. The popularity of this investment theme has also been boosted by growing awareness of the social problems that have worsened during the pandemic.

While we applaud the amazing speed of this growth, we’re also concerned. When markets move this far this quickly, inevitably some corners end up being cut. We see a risk that money will flow into investments whose ESG credentials don’t stand up to closer scrutiny.

**Sustainability-linked bonds**

Take the growing popularity of sustainability-linked bonds (SLBs). SLBs allow borrowers to set a sustainability target, while committing to pay a penalty if they fail to achieve that target.

Investors are attracted to them because issuers are tied to specific outcomes rather than a simple expenditure goal. This, in theory, more closely aligns the interests of borrowers with those of investors who want a clearer idea of the positive effects of their capital.

Bank of America expects global SLB issuance to hit some US$100 billion by year-end.3 This is extraordinary considering this market only started in 2019, and just US$9.5 billion of SLBs were issued in the first quarter of this year.

Although this is global data, we’ve also seen SLB issuance grow with the same momentum in Asia. What’s more, European markets will likely be fertile ground given the region’s history at the forefront of developments in responsible investing.

**What’s the problem?**

Financial instruments that are marketed with an ESG label often come with a second-party opinion from a ESG ratings agency, such as Sustainalytics or Vigeo Eiris. This is to ensure alignment with a recognised framework – for SLBs this would be the International Capital Market Association’s SLB principles. This framework contains five components:

- Selection of key performance indicators (KPIs)
- Calibration of sustainability performance targets (SPTs)
- Bond characteristics
- Reporting
- Verification

The framework states that SPTs should be ‘ambitious’ and ‘beyond a business as usual trajectory’. It also requires that variation from original terms should be ‘meaningful’.

Unfortunately, these requirements are qualitative. So far, second-party opinion providers have been unable to establish requirements that are quantifiable. In particular, the issue of ‘meaningful’ variation has been problematic.

For example, all but one of the US dollar-denominated SLBs issued in the first quarter feature a penalty of less than 10% of the original coupon rate. Nearly half of these SLBs have a variation of less than 5% of the original coupon rate.4

In several cases, the coupon variation, or step-up, only applies to the final year of the SLB’s life, making the present-value impact of the potential financial cost even less significant.

What’s more, there are other examples where the measurement of KPIs and financial costs coincide with times when the bonds are callable. This gives the issuer an option to redeem the bonds early and avoid paying a financial penalty.5

**Case studies:**

- A five-year bond from Asia with KPIs that only require the installation of certain assets at a total cost of US$1 million (from annual capital expenditure of up to US$200 million). The penalty for failing to meet this target is a 25 basis points-increase to the interest rate for 15 months prior to maturity – a period of time when the bonds are callable.
- An 8.5-year bond from the US with a 12.5 basis points-coupon step-up if the issuer fails to achieve emissions-reduction targets. However, the step-up applies from the fifth year onwards – when the bond becomes callable at par.
- A 10-year bond from Asia with a KPI based on achieving emissions reduction targets. While the coupon step-up is a meaningful 75 basis points, KPI assessment doesn’t take place until nine years after the bonds have been issued. That means the economic cost to the issuer for failing to meet the target would be immaterial.

What should investors do?

‘Greenwashing’ is when a company deliberately overstates green credentials. This is a risk in the SLB market where we see great diversity in the quality of bonds. That’s why the bottom-up assessment of issuers and the specific features of individual SLBs, is critical.

Investors need to be more discerning, not skimp on due diligence, and speak out whenever they find something that needs addressing.
Investors need to be more discerning, not skimp on due diligence, and speak out whenever they find something that needs addressing.

They need to ask themselves whether an issuer is undertaking substantive changes to transform its business. Is it benefiting from the retirement of aging assets to meet its KPIs? Are the costs of failing to meet SPTs significant, immaterial, or can they be avoided?

Investors can also push issuers to improve the quality of SLB issuance by demanding:

- That KPIs are assessed on multiple dates that span most, if not all, of a bond’s life;
- Greater use of milestones to track progress on meeting KPIs over time;
- Financial penalties that reflect a higher proportion of the original borrowing cost;
- Call features don’t allow issuers to circumvent the costs of failing to meet KPIs.

Being a good ESG bond investor involves more than reading what’s written on the tin. There can be no substitute for the hard work that lies behind active investing.

1 Aberdeen Standard Investments, MSCI ESG Research LLC/Lipper, EPFR, BofA Global Research, April 2021

2 Bloomberg, April 2021

3 BofA Securities, ESG in Fixed Income Quarterly, April 2021

4 Aberdeen Standard Investments, April 2021

5 Aberdeen Standard Investments, April 2021

Sustainability-linked bonds: a new platform for greenwashing?

large_1440x770asiAWomansplace.jpg

medium_1440x770asiAWomansplace.jpg

small_1440x770asiAWomansplace.jpg

thumbnail_1440x770asiAWomansplace.jpg

1440x770asiAWomansplace.jpg

Covid-19 has inflicted disproportionate hardship on women, widening the already yawning gap in gender inequality. But as well as the issue of social justice, there are powerful economic reasons for increasing diversity and inclusivity in the workforce.

It’s no secret women have borne the brunt of the fallout from Covid. Lockdowns have hit hardest at low-paid service-sector jobs typically filled by women. At the same time, women’s unpaid caring responsibilities have increased with home schooling and home working.

But as well as the issue of fairness, there’s a powerful efficiency argument for gender equality in the workplace. Increasing diversity and inclusivity in the workforce can lift incomes and growth. With populations ageing and productivity growth falling, corporate and government policy encouraging female participation in the workforce could provide a much-needed shot in the arm for the global economy.

For a start, gender differences in the workforce underscore the poor return on investment in education. Women are generally as well-educated as their male counterparts in most developed countries, or more so. Yet, they’re far more likely than men to face a trade-off between accepting paid work and taking unpaid work, including caring responsibilities. Consequently, women are less attached to the workforce. And, when they do work, they do fewer hours, fuelling the gender gaps in pay, progress and opportunities.

Our research sets out to understand what drives female participation in the workforce. We analysed data for 31 countries from 2002 to 2016. Our findings suggest five clear actions for policymakers and companies wanting to lift female participation.

1. Ensure men have access to paternity leave so the burden of child-related career breaks is more evenly shared.

The most striking finding is that higher legislated paternity-leave entitlements are significantly and positively associated with higher rates of female labour-force participation. A one-week increase in paternity leave on average increases female participation by around 3%. The benefits seem to peak at about seven weeks but continue to have net positive effects for many months thereafter.

This make sense. If women expect to take career breaks while their partners don’t, this naturally creates less attachment to the labour force. An employer considering two candidates of different genders may favour the person least likely to leave. If all parents expect to take leave, these barriers to women entering and remaining in the workforce should decline.

But higher paternity leave entitlements are only part of the solution. Men still show unswerving reluctance to take paternity leave - we must do more to incentivise men to take their entitlements.

2. Reduce tax penalties for second earners and sole parents

Women tend to be the second earners in dual-income households and are more likely than men to be single parents. Some countries impose higher taxes on second earners and sole parents, discouraging female participation. Governments should reform tax systems to level the playing field.

3. Consider both quantity and quality of female work

Many women have to juggle work with caring responsibilities. So, part-time work and flexible, short-term employment are crucial in keeping women connected to the workforce, especially during early parenthood.

For women in regular work, we found a positive relationship between employment protections and female participation. But, for temporary contracts, the opposite held – weaker protections were associated with higher levels of female participation. This suggests workplace flexibility allows easier entry and re-entry for women. Companies must find a balance between protections and providing the flexibility parents and caregivers need.

4. Strengthen performance and resilience of the overall economy

We found three economic factors closely and positively linked with female workforce participation: countries’ economic output; education; and male labour-force participation. The findings reinforce the importance of sound economic policy aimed at steady, long-term growth. As the deep recessions caused by Covid have shown, women are more likely than men to be forced from the workplace in times of economic strife.

5. Report more and higher-quality data

Finally, there’s a sparsity of good-quality, company-level data on diversity and inclusion policies. Existing legislation needs to be strengthened and expanded in scope. Without adequate information, we can’t fully understand what works in terms of improving diversity and inclusion, and how that affects corporate performance.

Implications for investors

Our research has important implications for investors. The findings can help identify countries best-positioned to boost female participation, enhance economic efficiency and tackle long-term growth challenges. The work also highlights the importance of social factors in influencing long-term economic and, hence, market outcomes. This is particularly relevant as environmental, social and governance (ESG) issues become increasingly central to investment approaches. The study gives further weight to the often underestimated ‘S’ in ESG risks and opportunities, particularly for investors with long-term strategic investment horizons.

Chart 1: Factors that influence female labour-force participation rates (LFPR)

![aberdeen gender chart.JPG](/uploads/aberdeen_gender_chart_0fa73bc4d4.JPG)


 
Source: Barro&Lee, Maddison Project, OECD, Prospered Project, World Bank, ASIRI (as of 2016)

A woman's place: gender equality in the workplace benefits all

large_fullterton rethinking retirement.JPG

medium_fullterton rethinking retirement.JPG

small_fullterton rethinking retirement.JPG

thumbnail_fullterton rethinking retirement.JPG

fullterton rethinking retirement.JPG

The COVID-19 pandemic has impacted all aspects of people’s lives, disrupting schedules and changing plans. Like many others around the world, Singaporeans have had to embrace a different normal. This pandemic has also led many to re-evaluate their long-term plans, creating an impetus to think about retirement.

To understand the pulse of the nation, Fullerton Fund Management surveyed Singaporeans to better understand their evolving aspirations, expectations, and priorities when it comes to financial management and retirement planning.

Four key findings stood out when examining Singaporeans’ changing habits, perceptions, and attitudes in a post-pandemic world:

- Singaporeans are re-defining the whole idea of retirement and how to get there 
- COVID-19 pandemic has triggered Singaporeans to plan for the future
- Understanding of risk and return is evolving; Singaporeans look to investment to generate retirement income
- Growing importance of digital tools

For more insights, please download the report: http://imas.org.sg/public/media/2021/06/30/2000_Rethinking_Retirement.pdf

Rethinking Retirement: How digital technologies and COVID-19 are reshaping the way Singaporeans approach retirement

small_FTSG_CAROL_IMG_0321_01.png

thumbnail_FTSG_CAROL_IMG_0321_01.png

FTSG_CAROL_IMG_0321_01.png

Investors today are navigating uncharted waters, amidst market volatility in a pandemic world, and such uncertainties tend to result in emotions running high.

However, investors need to understand that market volatility is part of investing, and learn how to live with it. Market downturns may happen frequently, but they don’t last forever

To be able to navigate volatility and potentially emerge unscathed, it is important that investors keep three strategies in mind:

**Stay Calm**

Keep a long-term perspective and tune out the noise.

**Diversification Matters**

Diversification may reduce overall volatility and provide a smoother ride through bumpy markets.

**Remember Your Strategy**

While it may be tempting to pull out of the stock market during volatility, it is important to stick with an investment strategy.

**Navigating Market Volatility.**

When markets are choppy, it is natural for emotions to run high.
![FTSG_CAROL_IMG_0321_01.png](/uploads/FTSG_CAROL_IMG_0321_01_fda7631869.png)

*This chart is for illustrative purposes only and does not reflect the performance of any Franklin Templeton fund. Past performance does not guarantee future results. Source: © Morningstar 2021. Franklin Templeton Capital Market Insights Group. Average annual return from 12/31/2010-12/31/2020. Indexes are unmanaged and one cannot invest directly in an index. Index returns do not reflect any fees, expenses or sales charges.*

**Market downturns don't last forever.**

Investors need to understand that market volatility is part of investing.
![FTSG_CAROL_IMG_0321_02 (1).png](/uploads/FTSG_CAROL_IMG_0321_02_1_615ae2da91.png)

*This chart is for illustrative purposes only and does not reflect the performance of any Franklin Templeton fund. Past performance does not guarantee future results.
Source: © Morningstar 2021, Standard and Poor’s. Indexes are unmanaged and one cannot invest directly in an index. Index returns do not reflect any fees, expenses or sales charges.*

**What can help investors?**

Let’s look at three strategies that can help investors live with market volatility.

![FTSG_CAROL_IMG_0321_03.png](/uploads/FTSG_CAROL_IMG_0321_03_c665280015.png)

**Stay Calm.**

First and arguably the most important concept of investing is to keep a long-term perspective.

![FTSG_CAROL_IMG_0321_04.png](/uploads/FTSG_CAROL_IMG_0321_04_9b0f5e0ec8.png)

**Acting on fear may divert investors from their long-term goals.**

When faced with volatility, acting on fear and pulling money out of the market may divert investors from their long-term goals. While past performance cannot guarantee future results, keeping a long-term perspective can help during times of volatility.

![FTSG_CAROL_IMG_0321_05.png](/uploads/FTSG_CAROL_IMG_0321_05_4e1c0405ae.png)

*This chart is for illustrative purposes only and does not reflect the performance of any Franklin Templeton fund. Past performance does not guarantee future results. Source: © Morningstar 2021. Franklin Templeton Capital Market Insights Group. Indexes are unmanaged and one cannot invest directly in an index. Index returns do not reflect any fees, expenses or sales charges.*

**Tune Out the Noise.**

The perception of a portfolio would change depending on the monitoring period. A way for investors to stay calm and not act on emotions is to watch their portfolio less.

![FTSG_CAROL_IMG_0321_06.png](/uploads/FTSG_CAROL_IMG_0321_06_a28b32f282.png)

*This chart is for illustrative purposes only and does not reflect the performance of any Franklin Templeton fund. Past performance does not guarantee future results. Source: © Morningstar 2021, Macrobond. S&P 500. Analysis by Franklin Templeton Capital Group. Monitoring periods are represented by 10-year, 5-year, 3-year, 1-Year, monthly rolling periods for S&P 500 Index from 12/31/70–12/31/2020. Indexes are unmanaged and one cannot invest directly in an index. Index returns do not reflect any fees, expenses or sales charges.*

**Diversification Matters.**

Diversification is a staple of investing and may reduce a portfolio’s overall volatility and provide a smoother ride through bumpy markets.

![FTSG_CAROL_IMG_0321_07.png](/uploads/FTSG_CAROL_IMG_0321_07_79dcb35758.png)

**As markets change, your portfolio may need to evolve.**

This chart shows how various asset classes performed on a year-by-year basis over the last 15 years. No asset class has consistently offered the best return year in and year out, so investors need to have a diversified asset allocation plan.

![FTSG_CAROL_IMG_0321_08.png](/uploads/FTSG_CAROL_IMG_0321_08_f850d0197d.png)

*This chart is for illustrative purposes only and does not reflect the performance of any Franklin Templeton fund. Past performance does not guarantee future results. Source: © Morningstar 2020. Larger growth stocks are represented by the S&P Growth Index; Large value stocks are represented by the S&P 500 Value Index; Small growth stocks are represented by the Russell 2000 Growth Index; Small Value stocks are represented by the Russell 2000 Value Index; Foreign stocks are represented by the MSCI EAFE Index; Bonds are represented by the Bloom berg Barclays U.S. Aggregate Index; High yield bonds are represented by the Credit Suisse High Yield Index; Emerging market stocks are represented by the MSCI Emerging Markets Index; Global bonds are represented by the FTSE World Government Bond Indexes; Hedge Strategies are represented by the HFRX Global Hedge Index. Indexes are unmanaged and one cannot invest directly in an index. Index returns do not reflect any fees, expenses or sales charges. Diversification does not guarantee a profit or a protect against loss.*

**Why Diversify? Because Winners Rotate.**

Keeping assets properly allocated across several asset classes helps reduce overall volatility and improves your chances to earn more consistent returns over time. This chart shows how the strategy that allocates investments across several asset classes performs relatively better.

![FTSG_CAROL_IMG_0321_09.png](/uploads/FTSG_CAROL_IMG_0321_09_6f018651d6.png)

*This chart is for illustrative purposes only and does not reflect the performance of any Franklin Templeton fund. Past performance does not guarantee future results. *Annual investments are made into the best performing asset class index of the previous 12-month period. **Annual investments are made into the worst performing Index of the previous 12-month period. ***Annual investments are evenly distributed across all asset class indexes each year and rebalanced annually. Source: © Morningstar 2020. The three scenarios include large growth stocks, represented by the S&P Growth Index; large value stocks, represented by the S&P 500 Value Index; small growth stocks, represented by the Russell 2000 Growth Index; Small Value stocks, represented by the Russell 2000 Value Index; foreign stocks, represented by the MSCI EAFE Index; bonds, represented by the Bloomberg Barclays U.S. Aggregate Index; high yield bonds, represented by the Credit Suisse High Yield Index; emerging market stocks, represented by the MSCI Emerging Markets Index; global bonds, represented by the FTSE World Government Bond Indexes; hedge strategies, represented by the HFRI Fund Weighted Composite Index. Indexes are unmanaged and one cannot invest directly in an index. Index returns do not reflect any fees, expenses or sales charges. Past performance is no guarantee of future results. Diversification does not guarantee a profit or a protect against loss. Indexes are unmanaged and one cannot invest in them. They do not include fees, expenses or sales charges.*

**Remember your investment strategy.**

Review that plan when emotions are running high.

![FTSG_CAROL_IMG_0321_10.png](/uploads/FTSG_CAROL_IMG_0321_10_9a0d61558c.png)

**Dollar Cost Averaging can make it easier to cope with volatility.** 

As markets move up and down, so will the cost of your investment. Committing a fixed amount of money at regular intervals to an investment, a.k.a dollar cost averaging, can help reduce anxiety about the investment process.

![FTSG_CAROL_IMG_0321_11.png](/uploads/FTSG_CAROL_IMG_0321_11_23bdfd20df.png)

*This chart is for illustrative purposes only. Dollar cost Averaging does not assure a profit or protect against loss in declining markets. Investors should consider their ability to make regular investments during all market conditions.*

**Don't time the market.**

This chart shows the 20 worst trading days and the 20 best trading days of the S&P 500 index over the last 20 years. In many cases the best trading day immediately follows the worst trading day illustrating how difficult it is to attempt to time the market.

![FTSG_CAROL_IMG_0321_12.png](/uploads/FTSG_CAROL_IMG_0321_12_9b84d4727e.png)

*This chart is for illustrative purposes only and does not reflect the performance of any Franklin Templeton fund. Past performance does not guarantee future results. Source: © Morningstar 2021. S&P 500. Based on returns in local currency over a 20-year period ended 9/30/2020. Indexes are unmanaged and one cannot invest directly in an index. Index returns do not reflect any fees, expenses or sales charges.*

**Jumping In and Out of the Market Can be Costly.**

Just as many investors are slow to recognize a retreating stock market, many also fail to see an upward trend in the market until after they have missed opportunities for gains. An investor who stayed fully invested and didn’t miss any of the best days would have earned a significantly higher return than those who missed the best days.

![FTSG_CAROL_IMG_0321_13.png](/uploads/FTSG_CAROL_IMG_0321_13_8bfd6ef335.png)

**Key Takeaways**

1. Markets have tended to reward patient investors over long periods of time.

2. Emotions affect decision-making ability.

3. Stay calm, diversification matters, and remember your strategy.

![FTSG_CAROL_IMG_0321_14.png](/uploads/FTSG_CAROL_IMG_0321_14_d907b26eb1.png)



How to Navigate Market Volatility

small_FTSG_CRTF_CAROL_IMG_0321_L1_01.png

thumbnail_FTSG_CRTF_CAROL_IMG_0321_L1_01.png

FTSG_CRTF_CAROL_IMG_0321_L1_01.png

Everyone has different financial goals, with varied time horizons, and there are plenty of investment products out there that aim to help you achieve your goals. Choosing the right type of investment product or fund for each goal is crucial, and there are important considerations for you to think about. In this section, learn more about how to choose the right type of fund for each of your goals.

**Choosing the Right Type of Mutual Fund**

There are many different types of mutual funds, and it is important to choose the right ones that meet your various investment objectives.

![FTSG_CRTF_CAROL_IMG_0321_L1_01.png](/uploads/FTSG_CRTF_CAROL_IMG_0321_L1_01_85766e90b6.png)

**Making Financial Decisions in Life**

Life has many expenses and financial decisions in store for you – big and small decisions, urgent expenses and not so urgent ones.

![FTSG_CRTF_CAROL_IMG_0321_L1_02.png](/uploads/FTSG_CRTF_CAROL_IMG_0321_L1_02_41158734b5.png)

**Setting Financial Goals and Time Horizons**

There are different types of financial goals with varying time horizons, and various investment products, such as mutual funds, are available to help you achieve them. When setting them, it is important for each goal to be specific, achievable and measurable.

![FTSG_CRTF_CAROL_IMG_0321_L1_03.png](/uploads/FTSG_CRTF_CAROL_IMG_0321_L1_03_475a9ec6c8.png)

**Matching Financial Goals with Investments**

Goals-based investing is crucial if you wish to stay on track to achieve your goals. It involves having a customized plan and choosing specific products that may have the best chance of meeting each particular goal.

![FTSG_CRTF_CAROL_IMG_0321_L1_04.png](/uploads/FTSG_CRTF_CAROL_IMG_0321_L1_04_43888a4f3a.png)

**Creating an Investing Roadmap**

You can also categorize your goals in order of priority, ie on a scale from the important and urgent goals (financing a house), to not-so-urgent ones (buying a new car), to distant future goals (funding your desired retirement lifestyle).

![FTSG_CRTF_CAROL_IMG_0321_L1_05.png](/uploads/FTSG_CRTF_CAROL_IMG_0321_L1_05_f62972e40a.png)

**Allocation of Funds Based on Priority of Goals**

You should first allocate funds for the important and urgent goals, and then for the others once the high priority goals are covered.

![FTSG_CRTF_CAROL_IMG_0321_L1_06.png](/uploads/FTSG_CRTF_CAROL_IMG_0321_L1_06_28d4b4a7fc.png)

**Types of Investment Plans**

You can also choose between investing lump sum amounts or starting a systematic investment plan. Lump sum investing involves investing a single sum of money at one go. A systematic investment plan (SIP) involves contributing regular, fixed and often-small amounts into an investment product, like a mutual fund.

![FTSG_CRTF_CAROL_IMG_0321_L1_07.png](/uploads/FTSG_CRTF_CAROL_IMG_0321_L1_07_764546350c.png)

**Buying a House**

Let's focus on an important financial goal for everyone – buying a house and ensuring you can afford the mortgage payments comfortably.

![FTSG_CRTF_CAROL_IMG_0321_L1_08.png](/uploads/FTSG_CRTF_CAROL_IMG_0321_L1_08_82e3dd1dfb.png)

**Buying a House - Types of Funds to Consider**

This goal requires a steady growth of investments meeting their long-term accumulation goals. In this situation, you could consider investing in equity funds. Depending on your risk appetite, there’s a wide range of equity funds to choose from, like large, mid, small-cap as well as sector funds.

![FTSG_CRTF_CAROL_IMG_0321_L1_09.png](/uploads/FTSG_CRTF_CAROL_IMG_0321_L1_09_75b18e1162.png)

**Planning for Retirement**

Now fast forward to your retirement. You would want regular, passive income from your investments to fund living expenses, which may come from long-term bond funds.

![FTSG_CRTF_CAROL_IMG_0321_L1_10.png](/uploads/FTSG_CRTF_CAROL_IMG_0321_L1_10_1766559b6e.png)

**Ongoing Assessment, Monitoring and Tracking**

There is an endless number of scenarios and your circumstances and priorities can also change over time, as life is dynamic and ever-changing. It is important to continuously assess, monitor and track your progress towards your goals.

![FTSG_CRTF_CAROL_IMG_0321_L1_12.png](/uploads/FTSG_CRTF_CAROL_IMG_0321_L1_12_76720a03b3.png)

**Mutual Funds - One Stop Solution**

Mutual funds can be a one-stop simple solution for all your various investment goals. Choosing the right type of fund involves understanding a fund’s investment strategy, style, objective and risk profile, which then offers invaluable insights into the role it can play in your goals-based investing journey.

![FTSG_CRTF_CAROL_IMG_0321_L1_13.png](/uploads/FTSG_CRTF_CAROL_IMG_0321_L1_13_ebb1955a60.png)
















How to choose the right type of fund

medium_esg comic 5.JPG

small_esg comic 5.JPG

thumbnail_esg comic 5.JPG

esg comic 5.JPG

![esg comic 1.JPG](/uploads/esg_comic_1_1fa37fedf2.JPG)

![esg comic 2.JPG](/uploads/esg_comic_2_6dadff33e3.JPG)

![esg comic 3.JPG](/uploads/esg_comic_3_b43481dd24.JPG)

![esg comic 4.JPG](/uploads/esg_comic_4_bcfbd3dd6d.JPG)

![esg comic 5.JPG](/uploads/esg_comic_5_134089a915.JPG)

**Disclaimer** </br>
This document is for information only and does not constitute investment advice or a recommendation and was prepared without regard to the specific objectives, financial situation or needs of any particular person who may receive it and does not constitute legal or tax advice. This document may not be reproduced, distributed, or published without prior written permission from Franklin Templeton.
Any research and analysis contained in this document has been procured by Franklin Templeton for its own purposes and may be acted upon in that connection and, as such, is provided to you incidentally. Data from third party sources may have been used in the preparation of this document and Franklin Templeton has not independently verified, validated, or audited such data. Although information has been obtained from sources that Franklin Templeton believes to be reliable, no guarantee can be given as to its accuracy and such information may be incomplete or condensed and may be subject to change at any time without notice. Any views expressed are the views of the portfolio manager as of the date of this document and do not constitute investment advice. The underlying assumptions and these views are subject to change based on market and other conditions and may differ from other portfolio managers or of the firm as a whole. The mention of any individual securities should neither constitute nor be construed as a recommendation to purchase, hold, or sell any securities, and the information provided regarding such individual securities (if any) is not a sufficient basis upon which to make an investment decision. The information provided in this material is not intended as a complete analysis of every material fact regarding any country, region, or market. There is no assurance that any prediction, projection or forecast on the economy, stock market, bond market or the economic trends of the markets will be realized. Franklin Templeton accepts no liability whatsoever for any direct or indirect consequential loss arising from the use of any information, opinion or estimate herein and reliance upon the comments opinions and analyses in the document is at the sole discretion of the user. 
The value of investments and the income from them can go down as well as up and you may not get back the full amount that you invested. Past performance is not necessarily indicative nor a guarantee of future performance.
Products, services, and information may not be available in all jurisdictions and may be offered by other Franklin Templeton affiliates and/or their distributors as local laws and regulation permits. Please consult your own professional adviser for further information on availability of products and services in your jurisdiction. This is not an offer to sell or a solicitation of an offer to purchase securities in any jurisdiction where it would be illegal to do so.
Copyright© 2021 Franklin Templeton. All rights reserved.
Singapore: Issued by Templeton Asset Management Ltd, Registration Number (UEN) 199205211E, and Legg Mason Asset Management Singapore Pte. Limited, Registration Number (UEN) 200007942R. Legg Mason Asset Management Singapore Pte. Limited is an indirect wholly owned subsidiary of Franklin Resources, Inc.
```code block```

What is ESG?

medium_franklin solar.JPG

small_franklin solar.JPG

thumbnail_franklin solar.JPG

franklin solar.JPG

Technological disruptions continue to transform global society in many ways, and emerging markets have embraced them. In certain industries, these technological innovations are driving economic growth and presenting compelling new opportunities for investors. Franklin Templeton Emerging Markets Equity Institutional Portfolio Manager Nicole Vettise shines a spotlight on one of these powerful new opportunities right above our heads—solar.

When it comes to the powerful long-term structural case for investing in emerging markets, we have identified several “new realities” that encapsulate the growth drivers propelling these markets forward and unleashing compelling investment opportunities.

One of these new realities is how emerging markets have leapfrogged developed markets when it comes to innovation and technology. Drilling down further, it is disruption in certain industries, the transformation of certain agile companies and the opportunity around digitization that is capturing our attention.

Solar is one opportunity we identify within this theme of disruption.

The sun is of course a remarkable source of energy—every 90 minutes it provides enough energy to power all of humanity’s needs for an entire year. However, cost and conversion inefficiencies (the amount of power generated from a given amount of sunlight) mean that only a fraction of sunlight has been effectively harnessed and distributed—that is, until now.

Advancements in technology and innovation are allowing more sunlight to be converted into energy, and the scope for future growth is considerable.

One aspect of solar that has deterred investors in the past is policy risk. This risk is falling, however, as new solar projects no longer require government subsidies, meaning that market forces should increasingly determine the price of solar power.

Furthermore, thanks to innovation, solar is now the cheapest source of energy in many countries today, so there should be even less reason going forward to use environmentally harmful fossil fuels such as coal.

Indeed, the environment and concerns about global warming are top of global leaders’ agendas.

For example, in China, President Xi has set a target for the country to be carbon-neutral by 2060 and for 25% of the energy mix to be from renewables by 2030. This is testament to China’s long-term commitment on going green, as well as its ambitions to foster a global champion industry.

With the International Energy Agency referring to solar as the “king of electricity” and expecting it to account for 80% of the growth in global electricity generation in the next decade,1 the future does appear to look bright for solar.

China is a world leader in solar production; in 2019, 71% of solar modules were produced in China vs. 3% in the United States. 2

For investors looking to tap into the opportunities presented by this disruptive secular trend, China has the two largest players in what is a highly concentrated market.

One is the world’s largest solar photovoltaic (PV) glass producer. It commands a global market share of 32% and key competitive advantages are its scale and the ability to produce increasingly thinner solar glass. All of its solar glass production uses natural gas while some of its peers are using carbon-heavy coal and oil, so this company goes further in helping to resolve climate challenges.

It also has a solar farm subsidiary and has seen impressive growth, expanding from two to 32 solar farms across China in just six years. And, it is selling its power generation into the immense Chinese electric grid.

China is also home to the second largest global solar glass producer with a 21% global market share and the overseas market representing 30% of its sales.3 The company recently expanded capacity further, starting a new operation in Vietnam. This new location offers further advantages such as relatively cheaper wages, abundant raw materials (including silica sand), cheaper electricity and tax benefits.

As Chinese electricity generators race to grid-parity with coal, independent of state assistance, it is forecasted that solar will jump from about 2% of China’s energy mix to 6% by 2023.4

So, when it comes to emerging markets leapfrogging developed markets in innovation and technology, we believe China offers an opportune investment hunting ground for identifying global leaders that are disrupting the market.

ENDNOTES

Source: International Energy Agency, World Energy Outlook 2020. There is no assurance that any estimate, forecast or projection will be realized.

Source: International Energy Agency, Photovoltaic Systems Programme, “Trends in Photovoltaic Applications 2020,” data as of 2019.

Source: Franklin Templeton research.

Source: World Economic Forum, as of December 31, 2020. There is no assurance that any estimate, forecast or projection will be realized.

What Are the Risks?

All investments involve risks, including the possible loss of principal. The value of investments can go down as well as up, and investors may not get back the full amount invested. Stock prices fluctuate, sometimes rapidly and dramatically, due to factors affecting individual companies, particular industries or sectors, or general market conditions. Special risks are associated with foreign investing, including currency fluctuations, economic instability and political developments. Investments in emerging markets involve heightened risks related to the same factors, in addition to those associated with these markets’ smaller size and lesser liquidity. To the extent a strategy focuses on particular countries, regions, industries, sectors or types of investment from time to time, it may be subject to greater risks of adverse developments in such areas of focus than a strategy that invests in a wider variety of countries, regions, industries, sectors or investments. China may be subject to considerable degrees of economic, political and social instability. Investments in securities of Chinese issuers involve risks that are specific to China, including certain legal, regulatory, political and economic risks.

Shining a spotlight on solar in China

large_blog-photo.jpeg

medium_blog-photo.jpeg

small_blog-photo.jpeg

thumbnail_blog-photo.jpeg

blog-photo.jpeg

Strategically located at the centre of Asia Pacific, with a young population of more than 675 million across 11 countries[i], Southeast Asia is an economic block with one of the world’s fastest GDP growth rates[ii]. In recent years, the region has been attracting the attention of global investors. At the same time, in the context of responsible investing moving from a niche activity to the mainstream, research on the environmental, social, and governance (ESG) performance of Southeast Asia companies is limited.

In this article, we have a deeper look at the ESG disclosure and performance of major Southeast Asia countries, focusing on the ASEAN-6 countries (Singapore, Malaysia, Thailand, Vietnam, Indonesia, and the Philippines).

**ESG Disclosure Regimes**

All six countries require a particular form of ESG disclosure and governments provide guidelines to help issuers prepare sustainability information. All exchanges of the six countries are members of the Sustainable Stock Exchange Initiative. However, countries like Indonesia and the Philippines only had a requirement after 2020; therefore, we might see further improvement in ESG disclosure in these markets in the next few years.

Notably, in the 2019 sustainability disclosure performance ranking by Corporate Knights[iii], the Stock Exchange of Thailand ranks ninth of 47 stock exchanges worldwide, the highest of all exchanges in the APAC region. The Singapore Exchange, Philippine Stock Exchange, and Indonesia Stock Exchange rank 24, 30 and 36, respectively.

**Singapore**

The Singapore Exchange published the Sustainability Reporting Guide[iv] in 2016, which requires every listed issuer to prepare an annual sustainability report on a comply-or-explain basis. The Guide suggests issuers select a globally recognised sustainability reporting framework that is appropriate for and suited to their industry and business model and explain their choice. Issuers are also required to identify material ESG factors in financial terms. According to the Guide, the sustainability report should set out the issuer’s policies, practices, performance and targets related to the material ESG factors identified.

**Malaysia**

According to the listing requirements[v] issued by Bursa Malaysia, issuers are required to disclose a narrative statement of the management of material economic, environmental and social (EES) risks and opportunities (Sustainability Statement) in their annual reports. For the Main Market listed issuers, they must include in their Sustainability Statement the information of governance structure, the scope of the Sustainability Statement and the management of material EES risks and opportunities. Bursa Malaysia provides a Sustainability Reporting Guide and six toolkits to help issuers prepare the Sustainability Statement.

**Thailand**

In a new Corporate Governance Code[vi] issued in 2017, Thailand’s Securities and Exchange Commission (SEC) requires that company boards ensure sustainability reporting, as appropriate, using a framework that is “proportionate to the company’s size and complexity and meets domestic and international standards.” Additionally, the Stock Exchange of Thailand provides resources on its Sustainable Business Development Center website to encourage best practices. As per the SET’s guidelines, many companies choose to use the Global Reporting Initiative (GRI) as their reporting framework.

**Vietnam**

In compliance with provisions set out in Circular No.155/2015/TT-BTC[vii] issued by the **Ministry of Finance of Vietnam**, public companies should produce an annual report disclosing their environmental and social impact and objectives regarding corporate sustainability. In 2016, the State Securities Commission of Vietnam, in cooperation with the International Finance Corporation of World Bank Group, published an Environmental and Social Disclosure Guide, which is compiled based on the GRI G4 and encourages independent external assurance.

**Indonesia**

In Indonesia, all listed companies are required to publish Sustainability Reporting starting from 2020 according to Indonesia Financial Services Authority (Otoritas Jasa Keuangan - "OJK") rule number 51/POJK.03/2017: Implementation of Sustainability Finance for Financial Services Institutions, Issuers and Public Companies[viii]. Moreover, financial services providers must also submit a Sustainable Finance Action Plan, which describes their plan for implementing sustainable finance. The rule also provides guidance for sustainability reporting, including a list of content that issuers should consider disclosing.

**Philippines**

In the Sustainability Reporting Guidelines for Publicly-Listed Companies[ix] it released in 2019, the Philippines Securities and Exchange Commission requires all publicly listed companies to submit sustainability information together with their annual report on a comply or explain basis. A penalty for incomplete annual reporting will be imposed on companies that fail to do the same. The Guidelines also provides a Reporting Template which is built upon four globally accepted frameworks, including GRI Standards and the Task Force’s recommendations on Climate-related Financial Disclosure (TCFD).

**ESG Performance Comparison**

We compare the ESG performance of the ASEAN-6 countries leveraging Sustainalytics’ ESG Risk Ratings, which required the assessment of two dimensions: ESG risk exposure and ESG risk management. Exposure reflects the extent to which a company is exposed to material ESG risks. The Management component incorporates company commitments and/or actions that demonstrate how the company approaches and handles ESG issues. The scores below are all simple average of corresponding scores of all companies of the same country/region in our research universe.

Our findings show that Thailand leads the ASEAN-6 countries in terms of average ESG performance, contributed by moderate risk exposure level and relatively good management score. Vietnam and Indonesia show higher unmanaged ESG risk due to lower management score and higher exposure to high ESG risk industries such as steel, mining, oil and gas, electric utilities, and food.

Compared to the other regions, the ASEAN-6 countries on average, have a higher ESG risk than companies in Europe and North American, while in line with the APAC average. Five out of six countries, except for Thailand, lag behind the global average level.

**Exhibit 1: ESG Performance Comparison**

![ESG_SE_Asia.png](/uploads/ESG_SE_Asia_b98a982bb9.png)

*Source: Sustainalytics*


Many believe that Southeast Asia, as one of the world’s most important economic engines, has a prosperous future. As countries continue to step up their efforts to improve the transparency and management of ESG risks and opportunities, people in this area could also enjoy a more sustainable and harmonious future.

 

Sources:

[i] World Population Review (2021), “South Eastern Asia Population 2021”, World Population Review, accessed (03.05.21) at https://worldpopulationreview.com/continents/south-eastern-asia-population

[ii] International Monetary Fund (2021), “Real GDP growth”, [ii] International Monetary Fund, accessed (03.05.21) at https://www.imf.org/external/datamapper/NGDP_RPCH@WEO/OEMDC/ADVEC/WEOWORLD/APQ/SAQ/SEQ/CAQ/EUQ/TWN/EAQ

[iii] Corporate Knights (2019), “2019 World Stock Exchanges”, Corporate Knights, accessed (30.04.21) at https://www.corporateknights.com/reports/2019-world-stock-exchanges/

[iv] Singapore Exchange (2020), “Practice Note 7.6 Sustainability Reporting Guide”, Singapore Exchange, accessed (30.03.21) at http://rulebook.sgx.com/rulebook/practice-note-76-sustainability-reporting-guide

[v] Bursa Malaysia (2021), “Listing Requirements”, Bursa Malaysia, accessed (31.03.21) at https://www.bursamalaysia.com/regulation/listing_requirements

[vi] The Securities and Exchange Commission of Thailand (2017), “Corporate Governance Code 2017”, the Securities and Exchange Commission of Thailand, accessed (31.03.21) at https://www.sec.or.th/cgthailand/EN/Pages/CGCode/CGCodeIndex.aspx

[vii] The Ministry of Finance of Vietnam (2015), “Circular No.155/2015/TT-BTC”, the State Securities Commission of Vietnam, accessed (31.03.21) at https://ssc.gov.vn/ssc/contentattachfile/idcplg?dID=103390&dDocName=APPSSCGOVVN162103170&Rendition=No.155-2015-TT-BTC&filename=C155mf6Oct15DisclosureInformationSecurities%20(ban%20day%20du).pdf

[viii] Indonesia Financial Services Authority (Otoritas Jasa Keuangan) (2017), “Implementation of Sustainability Finance for Financial Services Institutions, Issuers and Public Companies”, International Finance Corporation, accessed (07.04.21) at https://www.ifc.org/wps/wcm/connect/bab66a7c-9dc2-412f-81f6-f83f94d79660/Indonesia+OJK+Sustainable+Finance+Regulation_English.pdf?MOD=AJPERES&CVID=lVXU.Oy

[ix] Republic of the Philippines Securities and Exchange Commission (2019), “Sustainability Reporting Guidelines for Publicly-Listed Companies”, Republic of the Philippines Securities and Exchange Commission, accessed (07.04.21) at https://www.sec.gov.ph/corporate-governance/sustainability-report/

ESG Disclosure and Performance in Southeast Asia

large_1440x770_asi_vertical-farming-the-future-of-food-production.jpg

medium_1440x770_asi_vertical-farming-the-future-of-food-production.jpg

small_1440x770_asi_vertical-farming-the-future-of-food-production.jpg

thumbnail_1440x770_asi_vertical-farming-the-future-of-food-production.jpg

1440x770_asi_vertical-farming-the-future-of-food-production.jpg

The way we grow food today is unsustainable. We are depleting our planet’s resources at a fast pace and food security for a growing population is at risk. How we use our finite land efficiently is one of the most important questions facing us today. There is one approach that we believe can help provide a more sustainable and resource-efficient solution to this vital issue – vertical farming.

This article was originally published on 12 June 2020 on Thinking Aloud.

**Vertical farm documentary**

In this short video, we visit Scotland’s first vertical farm. Intelligent Growth Systems operates an indoor plant-growing system that reduces water usage by 95%, avoids the need for pesticides and requires no sunlight.

**Food production today – what is the problem?**

Producing food is resource intensive in terms of water, energy and land. We are using natural resources quicker than the planet can regenerate. The last Earth Overshoot Day – the day we deplete nature’s resource budget for the entire year – was 29 July 2019. This is the earliest on record. Additionally, the use of pesticides has negative implications for biodiversity and health.

Food production is also vulnerable to the growing physical impacts of climate change. Warming temperatures cause heavier rains, leading to land degradation, water scarcity and soil erosion. This affects harvests and diminishes crop yields.

**Vertical farming – a potential solution**

Enter vertical farming (VF). As it sounds, VF is the practice of growing crops in vertically stacked layers indoors. VF seeks to optimise growth conditions for each plant and apply these conditions in a controlled and fully automated environment. This maximises yield and minimises environmental impacts. Vertical farms are best suited to herbs and leafy vegetables that do not grow too high or too deep in the soil. That means you can stack a lot of layers of plants in one building, making it a more cost-effective method of growing than traditional farming.

**Taking a look at Scotland’s first vertical farm**

At Aberdeen Standard Investments, we believe on-the-ground research and first-hand engagement are essential to fully understand a company, sector or investment trend.

To that end, we recently visited Scotland’s first vertical farm, developed by Intelligent Growth Solutions (IGS), an innovative agritech company established in 2013.

In 2018, IGS built its first vertical farming demonstration facility, which has allowed the team to develop and patent its breakthrough Internet-of-Things-enabled Power & Communications Platform. This platform uses Artificial Intelligence to identify optimal growth conditions for plants.

The vertical farm consists of four 40.8 square metre (sq. m) towers in an industrial block, utilising approximately 250 sq. m of land space. This is also then supported by an additional service area. Each tower can accommodate approximately 50 trays of plants. This setup is similar to a widely available automated warehousing system, and is easy to build and replace.

IGS has developed a system where conditions on each tray are managed individually. Each plant growth is supported by an optimisation algorithm and everything is controlled from a mobile application. It specifies the exact needs in terms of water, lighting, temperature and humidity by the minute, for the full growth cycle of the plant.

This state-of-the-art facility is based at the James Hutton Institute, a world leader in plant, crop, soil, land use and environmental research. Being based at the institute gives IGS access to expertise in plant science. It also means IGS can collaborate on projects that will facilitate the development of technology and demonstrate the scalability of VF – with the opportunity to deliver on a global scale.

**What benefits does vertical farming deliver?**

VF delivers significant benefits over traditional farming, as detailed below.

- Land use. VF uses significantly less land than traditional farming. At IGS’s vertical farm, each tower only requires 12% of the land compared to growing the same crops outdoors. There is also an opportunity to repurpose unused buildings for urban growth ( for example, London underground plant growth).
- Water. VF requires significantly less water than traditional farming as there is less evaporation and water can be easily recycled. The IGS farm has a closed loop irrigation system, which means rainwater is harvested, used and recycled, saving up to 95% on water usage.
- Climate resilience. VF helps increase the climate resilience of local food production. This is because crops can be grown all year, irrespective of the increasing frequency of extreme weather events, droughts and floods.
- Year-round growth. Given growth is possible 365 days a year, the number of annual growing cycles in vertical farming is much higher than in outdoor farming. This is also hugely beneficial for breeding more resistant plants quicker.
- Energy usage. A vertical farm combined with renewable energy would work extremely well, as it does not require a continuous baseload of energy and can cope with intermittency. The tower can be used to store energy and take it from the grid when needed.
- Energy can also be a concern, as keeping the vertical farm running requires energy that outdoor growth doesn’t. At IGS, each tray requires around 1 kilowatt for cooling and lighting. Maximising energy efficiency is critical. IGS’s vertical farm only delivers the lighting the plants need at a certain time and is, therefore, more energy efficient and cost effective than other indoor plant growth, e.g. a glasshouse.

On top of the energy requirements, there are additional challenges to VF. Only a relatively small number of crops are suitable for VF, but these ranks will expand as technology evolves. Start-up and ongoing costs can be high. There is also the perception that VF is ‘unnatural’. Again, we believe these will become less of an issue as the sector matures, policy support strengthens and the benefits become more apparent.

**What is the status and expected growth of vertical farming today?**

VF as a sector is in its infancy, but has the potential to change the way we grow our food. This is particularly relevant for areas with rapid population growth, strong urbanisation trends, land constraints and high vulnerability to climate change and water stress. IGS estimates the global market in VF will increase 24% per annum over the next three years.

Vertical farming as a sector is in its infancy, but has the potential to change the way we grow our food.
Its wider adoption would be most effective in drought-stricken regions, such as some areas in the Middle East and Africa. It is also suited to small and highly urbanised countries such as Israel, Singapore, Japan, Taiwan and the Netherlands. Further, VF is attractive in countries that suffer from heavy pollution and soil depletion but where demand for high-quality food is high. This would include parts of China.

To realise VF’s potential will require government policy support, including a clear strategy on how it fits into national polices. Stakeholder collaboration and education will be important. Meanwhile, there will be a need and opportunity for private and public investment. Given the levels of capital available, such investments could dramatically improve optimisation, increase scale and bring down costs.

**What does this mean for investors?**

For investors, knowledge about VF developments, the technology behind it and the sustainability benefits it delivers is relevant in a number of ways. There are likely to be winners and losers in the VF revolution. It is therefore important to understand the risks and opportunities as the sector develops. These insights can then be integrated in investment decisions and used to inform engagements.

Engaging with companies that are involved or are showing an interest in VF could afford valuable insights into the growth potential of the sector. It also provides an indication of opportunity for those publicly listed companies positively exposed to more sustainable farming.

There is potential for direct investment, too. For example, there are opportunities to fund innovative private companies that develop the technology and algorithms to optimise plant growth. Investors can also buy vertical farm buildings as real assets.

**Final thoughts…**

The way we grow food today is unsustainable in terms of land, water and energy. However, vertical farming represents an innovative way to produce better food, in a more efficient and environmentally sound way. With the right investment and engagement, VF could eventually become the food production method of choice for future generations.

Vertical farming – the future of food production

In this first of a four-part series, we provide a snapshot of Singaporeans' perceptions around retirement.

"Rethinking Retirement" is a study commissioned by Fullerton Fund Management to find out what Singaporeans think about retirement, as well as how digital technologies and COVID-19 have altered their approach to it. 

What does retirement mean to Singaporeans?

As narrated by John Cleese. 

Understanding these rules makes it easier to invest with confidence - not being daunted by market uncertainty nor being tempted to seek safety in the herd behaviour of other investors. 

None of us can predict what stock markets will do next, but by being informed and then investing for the right reasons, we can move the odds further in our favour.

Ten Golden Rules of Equity Investing

If your main objective is to grow your money, investing can be a great alternative to using a savings account. By investing, your aim is to grow your wealth in real terms over time. To learn more about what kind of investor you are and to find out more on investing, take our investIQ test here: www.schroders.com/investIQ

Schroders investIQ: Investing in a nutshell

A joint initiative of IMAS and LIA