A new report finds that dedicated environmental, social, and governance (ESG) investment assets are on track to grow from $8 trillion today to as much as $30 trillion by the end of this decade.
Broadridge Financial Solutions writes that asset managers stand to win up to $9 trillion of net new flows, with expanding opportunities through “thematic strategies, climate transition and net-zero solutions, and investments offering measurable sustainability impacts.”
It notes that net flows into ESG mutual funds and ETFs have risen dramatically this year to $577 billion in the nine months through September 2021, far surpassing the full-year total of $355 billion for 2020.
“Net flows into ESG mutual funds and ETFs have risen dramatically this year.”
“ESG strategies accounted for just 11% of overall mutual fund and ETF assets but captured 30% of inflows during the twelve months through September 2021,” Jag Alexeyev, Head of ESG Insights at Broadridge Financial Solutions, said in a statement. “While growth remains strong, the complexities and costs of ESG implementation have risen, and fund selectors have begun to ask harder questions.
Alexeyev adds that greenwashing has emerged as a key reputational risk that firms must address.
The report found the following:
- Among actively managed strategies, ESG drove more than 100% of flows in local European funds and 62% of flows in cross-border European and International markets.
- The EU’s Sustainable Finance Disclosure Regulation (SFDR) has reshaped the business. In response to SFDR, firms identified more than 5,700 funds as Article 8 ESG or Article 9 sustainable investment products with combined assets of $4.1 trillion (€3.6 trillion) as of September 2021.
- Demand for thematic strategies has reinforced the ESG trend. Thematic equity funds captured $303 billion in net inflows worldwide in the twelve months through September 2021, ten times greater than the amount in 2019. Dedicated ESG products represented 65% of that total.
Visit this link to download Broadridge’s ESG and Sustainable Investment Outlook Report.
With more than 20 years serving financial markets, John Sullivan is the former editor-in-chief of Investment Advisor magazine and retirement editor of ThinkAdvisor.com. Sullivan is also the former editor of Boomer Market Advisor and Bank Advisor magazines, and has a background in the insurance and investment industries in addition to his journalism roots.
