Remarks by Deputy Prime Minister and Coordinating Minister for Economic Policies Heng Swee Keat at UBS Singapore Family Office Forum on 7 July 2023.
Mr Edmund Koh, President of UBS Asia-Pacific and Member of the UBS Group Executive Board,
Mr August Hatecke, Head of UBS Global Wealth Management Switzerland,
Ms Young Jin Yee, Co-Head of UBS Global Wealth Management Asia-Pacific,
Ladies and gentlemen,
A very good morning. I am happy to join all of you today at the UBS Singapore Family Office Forum 2023. It is nice to meet in-person again after a prolonged COVID-19 hiatus.
Since this Family Office Forum last convened in Singapore in 2018, the global landscape has shifted in profound ways.
We may have emerged from the COVID pandemic, but we are facing continued dislocations resulting from geopolitical contestation, which will likely result in further fragmentation.
While the impact of shared challenges like climate change have grown more apparent and more urgent, the appetite for collective action has waned.
But there are some promising spots. One of these is the pace at which technology is advancing and applied. The breakthroughs in mRNA technology which helped the world emerge from the pandemic, and the breakthroughs in generative Artificial Intelligence, are two recent examples.
Such uncertainties and transformations – across the range of geopolitics, climate and technology – have spurred discussions on how we should navigate the way forward, to improve lives and livelihoods, and build a better world.
The choices that we make today – action or inaction, investments or disinvestments – will take us across different paths, for ourselves and for our future generations.
For investors, while we have to navigate today’s market volatility and uncertainty, these major shifts underscore the importance of looking beyond just quarterly or annual results to focus on longer-term returns and impact.
It is therefore timely that UBS has brought us together to explore the theme of “Forging legacies, impacting generations”.
You have an interesting programme lined up for you today, with sessions on the global macroeconomic outlook, building a balanced portfolio, and succession and legacy planning.
So let me start the day by suggesting two ways in which you can bring benefits not only to your next generations but to the world.
First, Family Offices should invest in sectors of the future to ensure that capital is deployed productively to support growth and innovation, and the creation of new jobs.
In my career, I have experienced three different bouts of crisis. First, as the Principal Private Secretary to Singapore’s founding Prime Minister Lee Kuan Yew during the Asian Financial Crisis, then as the Managing Director of the Monetary Authority of Singapore (MAS) during the Global Financial Crisis in the late 2000s.
More recently, I was also Finance Minister at the height of the pandemic and had to deliver five budgets within a year.
The key takeaway from all three episodes is the importance of channelling finance and capital appropriately and having sufficient buffer to weather volatility.
This is not only necessary for crisis management, or to ensure recovery in the short-term. It is also to build economic dynamism over the longer-term.
Through the economic cycles of the recent decades, Asia’s fundamentals have remained strong, and we remain an attractive destination for investment.
Notwithstanding two financial crises and a pandemic, the United Nations estimates that Foreign Direct Investment (FDI) inflows into Asia grew more than sixfold over the past 25 years, from US$108 billion in 1997 to almost US$662 billion in 2022.
I was also encouraged to read in UBS’ 2023 Global Family Office Report that almost a third of Family Offices are looking to broaden their asset allocations in the Asia-Pacific region over the next five years.
As you look to step up your investments in this region, I encourage you to lean into new growth areas – like digitalisation, AI, FinTech, automation, health and medical technology, and the green economy – to help accelerate the next bound of growth and development in Asia, and around the world.
If we can channel investments to catalyse innovation, and to make and scale technological breakthroughs, we can address many of our global challenges.
Family Offices, which take a long-term view of investment, can play an important role here, by expanding the capital pool for start-ups and business ventures to develop innovative solutions, and by investing in companies that are scaling up these innovations.
By catalysing innovation and scaling the solutions to tackle common global challenges like climate change and an aging population, you benefit not only the present generation but also future ones to come.
It is heartening to see how the economies of Asia are being transformed by technology. ASEAN alone is home to more than 50 unicorns.
As active investors, Family Offices can help to support innovative new enterprises, write exciting new chapters in the growth story of Asia’s digital and green economy.
Second, Family Offices should seek to make a difference by investing for social impact, so as to forge stronger legacies that will be treasured across generations.
Throughout history, we have seen many examples of those who are wealthy and successful giving back and contributing to the development of their communities and societies.
In the US, tycoons of the Gilded Age like John Rockefeller and Andrew Carnegie were also leading philanthropists of their time.
Likewise, in Singapore, early pioneers like Tan Tock Seng and P. Govindasamy Pillai contributed to society by building hospitals and institutions to support the less-privileged.
These individuals may have been known for their business acumen and vast amounts of wealth during their lifetimes. But their legacies are centred on the social good they brought about through their philanthropic investments and their community spirit.
The underlying premise – of a social compact whereby those who are successful actively contribute resources towards uplifting society and strengthening social cohesion – is even more important today.
Globalisation over the past several decades has given rise to more wealth and prosperity.
Indeed, global per capita wealth has increased by 44 percent between 1995 and 2018.
At the same time, it has also brought about greater inequalities both between and within countries.
The 2022 World Inequality Report found that the richest 10% of the global population owns 76% of all wealth, and the poorest half owns just 2%.
The technological revolution has exacerbated this, as the gains are disproportionately tilted towards those with the resources and capabilities to harness technology.
This gap between the haves and the have-nots, often amplified by social media, has become an emotive issue and a flashpoint. You see the Occupy Wall Street riots, and so on, even in the most capitalist economy. It threatens to create more fractures in an already-divided world.
As Family Offices, you can contribute to tackling this issue through the philanthropic efforts that you undertake. After all, you seek two types of “RoI” – the traditional “Return on Investment”, and also the“Rate of Impact”!
You have the advantage of being able to be more flexible, patient and risk-tolerant in the ways you channel your resources. You also can leverage your networks and expertise to multiply the impact of your investments.
It is encouraging that Family Offices in the Asia-Pacific are already leaning into philanthropic activities.
9 out of 10 Single Family Offices or SFOs in the region are currently involved in philanthropy, each disbursing US$4 million annually on average. But more can still be done.
One area where Family Offices can make a difference, both in investing for the future and in deploying philanthropic capital, is in catalysing the global green transition.
The world’s experience combatting COVID-19 has driven home the importance of prioritising sustainability.
Singapore, together with many other countries, has committed to achieving net-zero emissions by 2050. Two years back, we unveiled the Singapore Green Plan 2030 as a roadmap to a more sustainable future.
In Asia alone, the region’s pathway to net zero is expected to require up to US$37 trillion in investment by 2050. The scale of investments needed underscores the potential economic and social impact of supporting Asia’s green transition.
Some green projects may be deemed too risky for traditional private sector capital, from a returns perspective. In such cases, philanthropic capital can play a catalytic role by absorbing first losses to reduce risk and make projects more investible, and crowd in private capital to close funding gaps.
Through blended financing, for example, philanthropic capital in the form of concessional investments can help to crowd in commercial capital that is multiples of original funding.
Singapore seeks to build a strong ecosystem and good governance to facilitate the deployment of capital to build the future economy, and to achieve tangible social impact. We welcome Family Offices like yourselves to make the best use of the ecosystem here, to invest for the future, and to do good, both here in Singapore and in the region.
Many of you are familiar with Singapore’s wealth management ecosystem, and our credentials as an international financial centre.
UBS’ own growth in Singapore reflects this.
From a handful of professionals in 1970, UBS is now Singapore’s largest private bank, with around 3,400 employees across wealth management, asset management and investment banking.
Many Family Offices have in fact found Singapore attractive due to our conducive business environment and connectivity to the region and use Singapore as a base to explore investment opportunities in Asia.
As at end-2022, there were 1,100 Single Family Offices in Singapore, up from 700 in 2021.
Singapore’s ecosystem brings together the capabilities to manage investments, connectivity to facilitate investment flows, as well as a growing community to support the deployment of philanthropic capital.
Collectively, this provides a good vantage point from which Family Offices can make decisions on where to direct your investments, as well as connect with other stakeholders to establish partnerships and networks.
Platforms such as the Singapore Week of Innovation and Technology (SWITCH), Singapore Fintech Week, and Industrial Transformation Asia-Pacific (ITAP) will help you to plug into the start-up and SME landscapes, and keep up with the latest changes in technology, to push the boundaries of technology and innovation.
We also seek to support the intermediation of Family Offices’ investments to purposeful causes to benefit communities both here and in the region.
To build a community of like-minded donors and philanthropic intermediaries and raise awareness of opportunities and potential partnerships, the Wealth Management Institute and the Private Banking Industry Group, which is co-led by UBS, established the “Impact Philanthropy Partnership” or IPP in March 2023 with the support of MAS.
The IPP aims to support Family Offices based in Singapore by matching with relevant partners and accelerating the impact of your investments.
The IPP’s inaugural Forum last month explored how catalytic philanthropy could accelerate climate and sustainability solutions.
The Wealth Management Institute or WMI is engaged by MAS and EDB to curate the Family Office ecosystem in Singapore. In addition to the IPP, it offers many certified training programmes, and organises high-quality forums for Family Office principals to share best ideas on strategic issues such as governance, philanthropy, investment, risk management, and other important topics.
And we are doing more going forward.
Earlier this week, MAS announced enhanced incentives to encourage Family Offices to participate in blended finance structures including those that support the regional transition to net-zero and invest in climate-related projects.
Through a Philanthropy Tax Incentive Scheme, which will take effect in January 2024, we are also encouraging Family Offices to conduct more philanthropic activities through Singapore, both in Singapore and overseas.
UBS also plans to partner with Temasek Fund and Philanthropy Asia Alliance to catalyse partnerships for calls to action on climate action and sustainable communities, inclusive education, and resilient healthcare.
I should add that investing more in such philanthropic and other ESG causes is also enlightened self-interest. There are several reasons:
First, many of these provide good financial returns. Impact investing and social enterprises can deliver commercially attractive returns.
Second, it widens the purpose of your wealth, to create positive and more durable legacies, as the examples of Mr Tan Tock Seng and Mr P. Govindasamy Pillai illustrate so well.
Third, it helps to build social cohesion, pre-empt populist pressures and provides the conditions for sustained economic growth and wealth creation.
Let me conclude. As we deal with a world in transition, I encourage the Family Offices here today to broaden your vision of legacy-building and impact investing.
Many of you here have been established on the back of remarkable family heritages and the strong business success of your clients and principals.
As you talk about forging legacies and impacting generations, and think about how best to grow the resources at your disposal, I urge you to consider how these resources can best be channelled for the greater good and in a sustainable manner. This will truly help to cement legacies that stand the test of time.
Events like this Family Office Forum allow us to come together to align our priorities and explore partnerships and collaborations.
I hope that the Family Offices here today seize the opportunity to find like-minded partners and coalitions, both among each other and with other stakeholders, to build a better future for all.
I wish you a fruitful Forum ahead.
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