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 401(k) Specialist and 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. Experienced financial services content executive specializing in creative new media delivery. He joined the American Retirement Association in 2023 as Chief Content Officer, overseeing communications for the organization, as well as its sister organizations.
